Employers are required to pay an annual federal unemployment tax (FUTA) to the Internal Revenue Service. The FUTA tax covers the administrative costs of the Unemployment Insurance program, pays for the federal share of Extended Benefits and provides loans to states with insolvent trust funds.
The FUTA tax on employers is currently 6.0 percent. However, the federal government provides employers with FUTA tax credits that can reduce this percentage significantly.
As you may know, Rhode Island is one of 30 credit reduction states that borrowed from the federal government in recent years in order to continue to pay Unemployment Insurance (UI) benefits to eligible claimants. Prior to this borrowing, the FUTA tax credit available to Rhode Island employers was 5.4 percent, thereby reducing the total FUTA taxes due from the full 6.0 percent to 0.6 percent (6.0% tax -5.4% credit = 0.6%).
This is the third year in a row that RI employers will see a reduction in their FUTA tax credit. The credit reduction rises by an additional 0.3 percent each year. So the tax credit reduction will decrease by 0.9 percent for 2013 to 4.5 percent. This means that RI employers will pay a net FUTA tax of 1.5 percent for 2013
(6.0% tax - 4.5% credit=1.5%). The additional taxes collected by the credit reduction will be applied to RI's outstanding federal UI loan base.
The 1.5% FUTA tax is effective for RI employers’ 2013 federal taxable wages and will be due with your federal Form 940 by January 31, 2014.
Additional information is available under the ‘UI Info for Employers’ tab at www.dlt.ri.gov/ui. Click here for Questions and Answers on 2012 Tax Changes.
Questions on these tax changes should be directed to:
Phil D’Ambra, Chief of UI Employer Tax - (401) 574-8785
Elizabeth McCaughey, Manager of Benefit Charge - (401) 462-8302