Who is subject to federal unemployment tax - confused about NYS Department of Labor employer requirements
I'm starting a small consulting business in NY and trying to figure out if I need to pay federal unemployment taxes and how this affects my future unemployment eligibility through NYS Department of Labor. I've read conflicting information about who's actually subject to FUTA and when employers have to start paying into the system. Does anyone know the specific thresholds? I want to make sure I'm compliant but also understand how this impacts my ability to file for unemployment benefits later if my business doesn't work out.
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Amara Okafor
For federal unemployment tax (FUTA), employers are generally subject if they paid wages of $1,500 or more in any calendar quarter, or had one or more employees for at least some part of a day in any 20 or more different weeks during the year. The NYS Department of Labor follows similar guidelines for state unemployment insurance. As a business owner, you typically won't be eligible for unemployment benefits from your own business unless you're paying yourself as an employee and contributing to UI.
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Liam Sullivan
•So if I hire just one part-time employee for 20 weeks, I'd be subject to FUTA even if I only pay them $500 total?
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CosmicCommander
The $1,500 threshold is per quarter, not total. But yes, the 20-week rule with even one employee would trigger FUTA requirements. For NYS Department of Labor purposes, you'd also need to register for state unemployment insurance. Keep detailed payroll records because the reporting requirements are strict.
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Giovanni Colombo
•This is why I just use contractors instead of employees lol. Way less paperwork and no unemployment tax headaches.
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Fatima Al-Qasimi
Be careful about misclassifying workers as contractors when they should be employees. The NYS Department of Labor and IRS are cracking down on this. If they determine your 'contractors' are actually employees, you could owe back taxes plus penalties. I learned this the hard way when I got audited.
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Liam Sullivan
•What factors do they look at to determine employee vs contractor status?
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Fatima Al-Qasimi
•Control over how work is done, providing equipment, set schedule, exclusivity - lots of factors. The NYS Department of Labor has guidelines on their website.
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Dylan Cooper
I had issues getting through to NYS Department of Labor when I needed clarification on employer requirements. Spent hours on hold just to get disconnected. Finally used claimyr.com to get connected to an actual agent who could explain the registration process. They have a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. Saved me so much time compared to calling directly.
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Sofia Ramirez
•Never heard of that service before. Did they actually help with employer questions or just unemployment claims?
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Dylan Cooper
•They helped me get through to the employer services division at NYS Department of Labor. The agent was able to walk me through the whole registration process.
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Dmitry Volkov
Don't forget about the different FUTA rates too. Standard rate is 6% but you get credit for state unemployment taxes paid, usually bringing it down to 0.6%. Make sure you file your state returns on time or you lose that credit.
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