NYS Department of Labor - how to calculate federal unemployment tax for my business
I'm a small business owner in NY and I'm trying to figure out how to calculate federal unemployment tax properly. I have 8 employees and I think I owe FUTA but I'm not sure about the rate or how it works with the NYS Department of Labor state unemployment taxes I'm already paying. Do I need to coordinate this with my quarterly NYS Department of Labor filings somehow? I've been handling payroll myself but this is confusing me.
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Ella Cofer
FUTA is 6% on the first $7,000 of each employee's wages per year, but you get a credit for state unemployment taxes you pay to NYS Department of Labor. The effective rate is usually 0.6% if your state unemployment account is in good standing. You file Form 940 annually, separate from your quarterly NYS Department of Labor reports.
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Taylor To
•Thanks! So I pay both the NYS Department of Labor state rate AND the 0.6% federal rate? That seems like double taxation.
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Kevin Bell
The federal and state unemployment systems work together. You pay your regular NYS Department of Labor rate (which varies based on your experience rating) plus the 0.6% FUTA. The credit system prevents true double taxation - you get credit for what you pay to NYS Department of Labor against the 6% FUTA rate.
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Taylor To
•Got it, so it's more like the federal government is collecting through the state system with a small additional fee.
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Savannah Glover
Make sure you're staying current on your NYS Department of Labor quarterly payments! If you fall behind on state unemployment taxes, you lose the FUTA credit and have to pay the full 6% federal rate. I learned this the hard way.
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Felix Grigori
I had issues getting through to NYS Department of Labor when I had questions about coordinating my state and federal filings. Ended up using Claimyr (claimyr.com) to actually reach someone at the department who could explain how my state account status affects the federal credit. They have a demo video at https://youtu.be/qyftW-mnTNI that shows how it works for getting through to agents.
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Taylor To
•Interesting, I didn't know there were services to help with getting through to NYS Department of Labor. Might be worth it since I can never reach anyone.
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Felicity Bud
dont forget about the wage base! its only on first $7k per employee for federal but NYS Department of Labor has a higher wage base for state unemployment. you'll stop paying FUTA on an employee once they hit $7k but keep paying the state rate until they hit the NYS limit
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