Knowledge of payroll taxes is essential for any accountant and business owner. With the sharp increase in unemployment claims and related disputes, there were changes in FUTA tax rates in 2022 that aim to mitigate the new risks and prevent states from accumulating high loans (Towson, 2022). Employers are inclined to keep their workers to impact the unemployment rates positively. The states that have high loans will see a 0.30% decrease in FUTA discounts for every year they fail to fix their situation (Towson, 2022). It is a necessary step in a crisis that can alleviate governmental expenditures, although employers will suffer.
The change made it clear that states must correct their direction on employment statistics. There was a 90 percent discount for employers who pay their FUTA taxes on time, which put the effective FUTA tax rates at 0.6% of employees’ annual wages with a maximum of $420 (“Topic No. 759 form 940 – Employer’s annual federal unemployment (FUTA) tax return,” 2022). Now, FUTA will grow annually as long as a state fails to repay its loans, leading to a situation where employers will be pushed toward avoiding firing workers. The new rate may become 0.9% and greater over time for many parts of the United States. I believe that these rates will continue to shift toward higher risk mitigation attempts due to the destabilizing effects of the current global events. FUTA taxes must align with the country’s ability to counteract unemployment efficiently, and the recent changes reflect this need. In conclusion, FUTA rates regulate the unemployment rates by punishing states that fail to keep their economies balanced in times of crisis, yet they are essential for preventing a decline in the job market.
References
Topic No. 759 form 940 – Employer’s annual federal unemployment (FUTA) tax return. (2022). Internal Revenue Service.
Towson, T. (2022). 2022 SUI tax rates in a Post-COVID world. Equifax Workforce Solutions.