1. Pick
one peer’s post and review. Then comment in no less than one paragraph why you
found the information helpful, informative, etc. You must present new ideas
and/or thoughts, merely stating that you agree/disagree is not enough to earn
full points.
2. A
paragraph is considered a minimum of 400 words and 4-6 sentences.
3. Cite
all sources – you must provide the exact link to the reference. Please keep in
mind that citing sources does not mean you can copy and paste information from
the source and use it as your own. You also cannot only change a few words from
a source; all work must be in your own words.
Peer’s post:
As I researched on the Internet, I found that the last time the
FUTA rate (Federal Unemployment Trust Fund) changed was on June 30th, 2011, before that date
the FUTA tax was at a rate of 6.2% for the first $7000 of gross earnings. After
June 2011, the FUTA tax decreased to 6.0%. As the basic FUTA tax decreased to
6.0%, the impact the decrease had on employers was that they were able to pay
less FUTA tax.
If an employer decided they wanted the 5.4% credit
reduction, this would allow for an employer to have a net FUTA tax rate of 0.6%
instead of the 6.0% rate on the first $7000. Hence, if the employer paid their
state unemployment insurance in full and on time, would give them a credit back
of 5.4% from the federal government when the employer filed their Form 940,
FUTA tax return.
The maximum amount of tax for an employee before
the tax rate change was $434. The amount of tax paid after the tax rate change
makes the FUTA tax cap at $420 for the employee, which is the most an employer
should pay each employee. Given this change in the FUTA tax, the employee
receives $14 less with the decrease in the FUTA tax percentage.
The FUTA tax is for a Federal Unemployment Trust
Fund so that when a person lost a job there would be a form of income to rely
on until the individual found a permanent job. The FUTA tax will not even exist
in 20 years if the FUTA tax reduction rate decreases to zero. Employers, in all
probability, may not want to pay the high percentage rate of 6.0% as of 2022.
Anything to save a dollar is something an employer needs to help with the
survival of their business. Thus, if an employer can not afford to pay a FUTA
tax, then eventually, the government may need to remove the tax altogether or
decrease the maximum amount of tax the employer would need to pay for an
employee.
Futa credit reduction. Internal Revenue
Service. (n.d.). Retrieved May 1, 2022, from
https://www.irs.gov/businesses/small-businesses-self-employed/futa-credit-reduction