Filing Frequency and Unemployment Insurance Notices
Every fall, the IRS and the state in which your business resides will review whether your filing frequency requirement for withholding taxes (as well as for sales and use tax and other specialty taxes in your state) is appropriate. Both your federal and state deposit schedules can change. The deposit schedule you must use is based on the total tax liabilities you previously reported on forms during the specified lookback period. In general, the higher the tax liabilities you have reported the more frequently you must remit your taxes. It is common for a new business to start at a lower deposit frequency and then get increased to more frequent.
You will receive a notice if your filing frequency changes. These notices will arrive soon, if they have not yet already. Note that if your business has a fiscal year schedule, you may be notified a few months before the beginning of your fiscal year, and not necessarily now.
By now you should have also received notice if your state unemployment insurance rate (SUTA tax) is changing for 2024. SUTA tax is a percentage of an employee’s wages. This rate can, and often does, change every year. Each state sets a different range of tax rates. Your tax rate might be based on factors like your industry, how many former employees received unemployment benefits, and how long your business has been in existence.
The federal unemployment insurance rate (FUTA tax) does not change, so you will not receive a notice for this. If you’re not aware, the FUTA tax rate is 6.0%. The tax applies to the first $7,000 you pay to each employee as wages during the year. Generally, if you paid wages subject to SUTA, you may receive a credit of up to 5.4% of FUTA taxable wages when you file your annual Form 940. If you're entitled to the maximum 5.4% credit, the FUTA tax rate after credit is 0.6%. This results in up to $42 in FUTA taxes per employee.
PPG Partners may receive duplicate copies of the notices mentioned above, but this is not always the case. Please be sure to forward a copy of any notices to PPG Partners, especially if we complete your payroll. We will need these for your payroll beginning January 1, 2024.