A recent release by the NC Department of Employment Security Commission (NCESC) reports that our state’s unemployment trust fund reserve has reached $1 billion. This is the first time this has happened in over a decade! In fact, up until May of this year our state was in debt to the Federal government. From 2011–2014 North Carolina business paid $1 billion in penalties and interest due to that debt. Is there any good news? It is estimated since this debt is paid off and the unemployment reserve mark has been hit that employers will save more than $600 million in taxes during 2015-2016. Below is how this will be accomplished:
(1) Federal Unemployment Taxes – Up until 2015, NC employers did not receive the full Federal Unemployment Tax Act (FUTA) credit due to being in debt to the Federal government. On Federal Form 940, NC employers paid an additional 1.2% in unemployment tax on the Federal unemployment wage base. After reviewing several of our client’s Forms 940, this easily can equate to a $1,000+ per year tax savings for small to medium sized businesses. The change can be seen on the 2015 Form 940 draft forms showing NC as now a 0% payer for the credit reduction: https://www.irs.gov/pub/irs-dft/f940sa–dft.pdf
(2) State Unemployment Taxes – For 10 years employers have been paying a 20% state unemployment insurance tax surcharge. Per information reported by North Carolina News Network, this is set to be discontinued. Employers should review their 2016 unemployment tax rates for this change.
We recommend contacting your payroll provider for additional information on the above changes. This may be a tax savings that business owners were not aware of, but it is hopefully a permanent change that will produce yearly payroll tax savings.