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National Restaurant Association - Lower tax offsets set for employers in states owing on jobless benefits

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Lower tax offsets set for employers in states owing on jobless benefits

Employers in states that borrowed from the federal government to pay for jobless benefits and that haven't yet repaid the funds will feel it in their wallets as they file their tax returns for 2011.

Employers pay a 6 percent federal unemployment tax (FUTA) on employee wages up to $7,000. Typically, employers each year are able to offset the 6 percent federal tax with a 5.4 percent credit for state unemployment taxes paid.

However, employers who operate in states that still owe the federal government money for unemployment benefits will not be able to take the full 5.4 percent credit for 2011.

The IRS released a bulletin last month listing the 21 "credit reduction" states. Employers in most of these states will be limited to a 5.1 percent credit against FUTA taxes for 2011. The information is also available on the IRS's recently released 2011 Form 940, Employer's Annual FUTA Tax Return.

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