January 9, 2006
by Dylan Skriloff
New York businesses can expect another $21 per employee per year surcharge to be added to their unemployment insurance thanks to the state’s inability to repay debts to Washington.
State employers will see a 0.6% reduction of their annual FUTA tax credit for taxes filed in 2005. Lawmakers elected on November 11 to pass the reduction to businesses for the second consecutive year, equaling a total tax increase of $42 per employee. Last year the reduction was 0.3% or $21 per employee.
The state’s unemployment insurance fund has been in the red since 2002 and the federal government has been making up the difference and now as provided by the Federal Unemployment Tax Act, the feds will be levying a $21 increase in the tax per year until the fund is restored.
"This is just another one of the several costs of doing business in New York that are either the highest or nearly the highest in the country," said Mark Alesse, director of the New York state chapter of the National Federation of Independent Business.
"It’s the same old story it seems. New York businesses are again having to bear the burden of higher taxes," RBA President and CEO Al Samuels said.
Craig Liss of Airmont Business Systems Inc. was upset with how the state handled the tax issue.
"We are not being treated correctly. They have not been forthcoming with the business community so we can make budget decisions," Liss said. He noted that while state businesses were not informed about the increase, Federal 940 tax forms already had special exemptions on them to deal with New York’s situation.
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The tax is taking the form of a reduction in an automatic Federal tax credit and New York is the only state affected this year. Rob Lillpopp of the State Labor Department said he hopes the fund will be back in the black fairly soon. Last year at this time the state’s unemployment fund was $433 million in the red and now it’s only $121, he said.
The FUTA tax rate is currently 6.2% on the first $7,000 of an employee’s income. Under normal conditions, employers who pay their state taxes in full and in a timely manner receive a credit of 5.4%, thereby paying 0.8% or $56 per employee. New York businesses will pay $98 this year.
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