Form 940

[oceanlovin'ea]

I just prepared my first 940 for this season. Florida is a credit reduction state. So we have to do Schedule A. The amount on Schedule A is added to the amounts on page 1 of the 940. Wages paid first 6 months at .008 rate and the last six months at .006 rate.

Usually we have paid $56.00 FUTA. Now we have to pay $70.00 FUTA.

In addition, all employers had to pay an amount to Florida Department of Revenue to help off set the money the state borrowed from the government to pay the unemployment comp to people last year.

Could someone explain how this makes sense to me? They reduce our FUTA and then add more back????? I DON'T UNDERSTAND!!!!! How can I explain this to my clients?

Linda, EA

[KBTS]

Here is the news release from the IRS.

http://www.irs.gov/businesses/small/article/0,,id=250782,00.html

Since FL (like PA) owes the Feds money borrowed to pay UC claims, the amount of the credit reduction is being "reduced", resulting in the additional FUTA due on the 940. Since the IRS just announced this near the end of the year, the amount is paid on the 940 for 2011. For 2012, the credit reduction is .003 less for the whole year and payroll will be calculated accordingly.

[S T]

No Easy Explanation

However, I am advising my Clients, that it is really pretty simple, The State did not pay the Feds, so now the Feds are looking to the Employer to pay.

Sandy

[ChEAr$]

Alabama is not subject to the credit reduction because it paid the feds what it owed.
However, in order to do this , there was a special one time assessment on all employers
to come up with the funds. So one way or another, everybody paid.

[oceanlovin'ea]

Florida employers paid a one time charge last year too. That is why I am confused as to why we are paying again. Unless it is because Florida's unemployment was so high what employers paid didn't help.

We paid that one time fee to the state not to government.

Linda, EA

[JohnH]

Some states have been downright stupid about this. NC, for example, allowed some employers to earn a zero rate, which meant for several years they paid no unemployment tax. I have 2 clients who fit into this category.

The people who thought up this hare-brained scheme should talk to my auto insurance company. In more than 48 years of driving a car I've never had an accident, but I still get that bill for my premiums every year. It's quite a bit lower than it would be if I had filed any claims, but there's no way they're going to insure me for free, even if I don't have any accidents for the next 48 years I plan to drive.

[ChEAr$]

Some states have been downright stupid about this. NC, for example, allowed some employers to earn a zero rate, which meant for several years they paid no unemployment tax. I have 2 clients who fit into this category.

The people who thought up this hare-brained scheme should talk to my auto insurance company. In more than 48 years of driving a car I've never had an accident, but I still get that bill for my premiums every year. It's quite a bit lower than it would be if I had filed any claims, but there's no way they're going to insure me for free, even if I don't have any accidents for the next 48 years I plan to drive.

Lets see now, 48 plus 12. equals.... duh.....!

[S T]

More on 940

Florida employers paid a one time charge last year too. That is why I am confused as to why we are paying again. Unless it is because Florida's unemployment was so high what employers paid didn't help.

We paid that one time fee to the state not to government.

Linda, EA

Linda - I just received add'l info on the Credit Reduction for the Form 940 - so maybe this will assist you and answer your questions regarding Fl one time and the current reduction.

The additional tax is called a "credit reduction". It applies when the state has not repaid money that it borrowed from the federal government to pay unemployment benefits. (See "credit reduction state" under "What's New" on the instructions for Form
940.)

Sandy