As the 2014 rate year begins, employers are beginning to ask what to expect in 2014. While Tennessee and Minnesota have announced decreases in their rate schedules (Tennessee issues July 1, 2013), Delaware and Washington have increased their taxable wage base. Under another strategy to obtain solvency, Arkansas and Kansas have passed legislation to increase the rate of negative balanced employers. As mentioned in our August Newsletter, many states such as Indiana, South Carolina and Nevada are trying to repay their Title XII loans which will reduce the 2013 FUTA taxes paid on January 31, 2014. Florida, New Jersey and Vermont have been removed from the Credit Reduction list and will remain off the list unless they borrow under the Title XII provision before the end of the year. Delaware plans to repay their Title XII loan before the November 10, 2013 deadline which will remove them from the 2013 credit reduction states. Whether there is an increase or a decrease in the 2014 tax year will depend on the states where you are doing business.

Opportunities that can be evaluated from a tax perspective are voluntary contributions, joint accounts and negative write-offs. Strict rules and guidelines follow these opportunities as well as a careful analysis of each opportunity needs evaluated. Corporate Cost Control can evaluate that option on your behalf.

Voluntary contributions have long been an opportunity for an employer to pre-pay an amount that would allow the rate to be recalculated. The lower rate obtained must result in a savings for the voluntary contribution to be beneficial. A careful analysis is performed by the Tax Analyst at Corporate Cost Control to determine the profitability. Listed below are the states allowing a voluntary contribution, the expected mail date of the 2014 rate determination and the voluntary contribution deadline.

Negative write-off opportunities can also allow an employer’s rate to recover from the recession. New York has a mandatory write-off if the reserve balance of an employer falls below 21%. If the automatic write-off occurs, an employer is assessed the maximum rate allowable for three years. An evaluation can be made prior to the negative write-off to determine if it would be profitable for the employer to make a special voluntary contribution to avoid the maximum rate for three years. This evaluation is completed by your Corporate Cost Control Tax Analyst at when the tax rates for 2014 are issued.

Pennsylvania has a similar provision that is not a mandatory write-off but allows the employer to request a write-off of their reserve balance when the balance is negative greater than 20%. This must be requested by the employer between January 1 and April 30th of a given year. The employer would receive the maximum rate for the next three years. An analysis as to whether this is profitable will be completed when the rate determinations are issued.

Two more states have joined the negative write-off opportunities. Arkansas and Kansas will allow special voluntary contributions to avoid additional assessments added to the maximum rate for 2014. The details to these special write-offs are described later in this Newsletter.

Forming a Joint Account can also save an employer if they have multiple state account numbers in a state. Twelve states provide the joint account option. All states require a minimum duration of the joint account which can sometimes negate the first year of savings. The concept of the joint account is that two or more companies are joined together for the rate computation (only) and the result is a lower cost in contributions. For instance, a smaller employer in the joint account might pay a higher amount in contributions but the larger company (owned by the same parent company) can pay contributions at a lower rate. The result is that the parent company as a whole is paying less in contributions. Listed below are the states who allow this option, the deadline to request the joint account and the duration required.

DELEWARE TO INCREASE THEIR TAXABLE WAGE BASE

Delaware has passed legislation increasing the taxable wage base from $10,500 to $18,500 beginning January 1, 2014. The bill also included the establishment of a one week waiting period for claimants, a lower employer special assessment 0f 0.085% and allows the state to borrow money to repay their Title XII Loan balance. If Delaware repays the loan before November 10, 2013, employers will regain their full FUTA credit of 5.4%. FUTA wages would be calculated at a rate of 0.6% on the first $7000.

Arkansas has increased their maximum SUI Tax Rate. In 2013, negative balanced employers were assigned a base rate of 6.0% with an additional 2.0% added if they were negative for less than four years and a 4% will be added to the rate if they have been negative balanced for four years or more. S.B. 1116 has added that if an employer is negative over six years, an additional 6% will be added and after eight years and additional 8% will be added. Negative balanced employers could pay a rate as high as 13.1% in 2014. Arkansas is allowing negative balanced employers to make a voluntary contribution to repay their negative balance and avoid the high rate. A careful analysis will be needed when the 2014 rates are issued. The voluntary payment will need to be made by March 31, 2014.

Kansas is also offering an opportunity to repay a negative balance and avoid the additional assessment ranging from 0.3% – 4%. A careful analysis of whether it is beneficial can be completed by your tax analyst. The deadline for the Kansas special voluntary contributions will be determined when the 2014 rates are issued. Kansas has also announced that their taxable wage base will increase from $8,000 to $12,000 effective January 1, 2015 and will increase to $14,000 on January 1, 2016.

The Governor of Illinois has removed the requirement for Illinois employers to report the newly hired employee’s projected monthly wages on the new hire report. More strict penalties have been assigned to the misreporting of individuals. An employer who misclassifies an independent contractor that should have been an employee can be assessed a penalty of $1,000 per occurrence. Effective January 1, 2014 (H.B. 923), a contractor is required to file reporting the individuals they are treating as an independent contractor.

Minnesota will decrease their base rate from 0.5% to 0.1% for the calendar year 2014 if the trust fund balance is above $800 million as of September 30, 2013. The reduction in the base rate will also be effective for the 2015 rate year if the trust fund balance stays above $900 million as of September 30, 2014.

Wisconsin will allocate monies from the general fund to pay the interest on the federal loan for 2013 and 2014. Employers will not be assessed for the interest on the Title XII Loan. Wisconsin will not be able to repay their Title XII Loan by the November 10, 2013 deadline. Employers can expect to pay FUTA taxes at 1.5% for all of 2013.


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