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Tax Byte

Ohio Employers Subject to FUTA for 2nd Year in a Row

In an effort for the State of Ohio to repay its advances from the federal government, Ohio employers will again pay a 0.6% surtax against their Federal Unemployment wages for the 2012 calendar year.  This surtax is a result of loans from Federal Unemployment Insurance to the Ohio Department of Job & Family Services for unemployment claims.  For 2012, Ohio and 18 other states fall into this "credit reduction" situation, resulting in additional monies owed on their 2012 Federal Form 940. 

While the normal Federal Unemployment rate is 6.0% for each $7,000 of taxable employee wages, employers are offered a 5.4% discount for paying into their state's unemployment fund.  States may borrow against the federal unemployment insurance loan to pay unemployment benefits with a two year window for repayment.  If a state defaults on its repayment of the loan, the normal credit for employers is reduced.  Under the terms of the loan, the first year of credit reduction is 0.3% (2011's surtax), the second year is 0.6% (2012's surtax), and the third and subsequent years are capped at 0.9% for any loans not repaid by November 10th.

The credit reduction calculation is made on the Form 940, Schedule A and the surtax then carries forward to the traditional Form 940.

As always, if you have any questions or would like to discuss further, please give us a call.

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