940 FUTA Unemployment tax and Ohio Credit Reduction
In 2013, several states have remained on the list, including Ohio. A “credit reduction state” is a state that has borrowed money from the federal government with the economic stimulus loans a few years ago, and has not yet repaid the money. Of the 14 states on the Credit Reduction list just released this month, some of the states include:
Ohio – 0.9%, New York – 0.9% and Indiana – 1.2%
This means that instead of paying the 0.6% FUTA tax, there will be an extra 0.9% added, for a total of 1.5% total due. The Ohio Credit Reduction will add $63 per employee extra liability for the year in addition to the regular FUTA liability of $42 per employee on employees reaching the $7,000 yearly wage limit for unemployment. This makes a total of $105 per employee.
You must prepare the 940 Form Sch A page with the state taxable wages and the credit reduction liability based on the state reduction rate . The total Credit Reduction from the Sch A will be carried over onto page 1 of the 940 Form, in Part 3, line 11 and the amount will be added on to the total liability amount.
Social Security tax – wage base
The current social security wage base for 2013 is $113,700. The government will increase the social security wage base for 2014 to $117,000.
Medicare Tax – new additional tax
2013 started an additional .9% Medicare tax to be added to any employee whose wage is in excess of $200,000. If you have not done this yet, please make sure the additional amount is withheld before the end of the year. The wages of $200,000 will be at the 1.45% tax and any wages over that will be at a 2.35% tax for the rest of 2013. This additional .9% tax is for the employee only. There is no match by the employer for the additional %, the employer match will remain at the 1.45% for all wages.
1099 Vendors
This is also a good time to make sure you have information needed for 1099 recipients – full names, social security/Federal ID #’s and addresses. This will save your time and ours in January while preparing the 1099 forms that will be due January 31st.
If you have further questions on payroll taxes, please contact your accountant at William Vaughan Company.
Sandra Stone, Accountant
