2017 Unemployment Tax, Deposits, EFTPS, Earned Income and Small Business Health Insurance Tax Credits

Annual Payroll and Withholding Update Part 5 of 5

Part 5 of the Annual Payroll and Withholding Update provides information employers need to know about federal and state unemployment tax, tax deposits, the electronic federal tax payment system, earned income credit and the small business health insurance tax credit.

Federal Unemployment Tax (FUTA)

For 2017, the maximum taxable wage base remains unchanged at the first $7,000.00 of wages.  The tax rate will remain at 6% with the credit for payment of state unemployment tax remaining at 5.4%.  This results in the effective rate remaining at 0.6%.

State Unemployment Tax (SUTA)

The taxable wage base for Missouri will remain at $13,000.00 in 2017 and Illinois will remain at $12,960.00. Each state will issue your new contribution rate, effective January 1, 2017 based on your employment history.  If advantageous, Missouri permits a voluntary payment to reduce the rate as long as the payment is received by January 15, 2017.

Both states require employers, who no longer have unemployment tax liability, to formally close their unemployment accounts.  Severe penalties accrue if quarterly reports are not filed and accounts are not formally closed – even if no unemployment tax liability exists.

Tax Deposits

The IRS has recently mailed letters to all employers regarding their specific payroll deposit requirements.  Depository requirements are determined by the employer’s tax liability during a “look-back” period (July 1 to June 30 of the previous year).  Employers with less than $50,000.00 of deposit liability during the “look-back” period will be required to make a deposit on or before the 15th of the following month.

Employers who report $50,000.00 or more in total employment tax liability during the “look-back” period will be designated as semi-weekly depositors.  For semi-weekly depositors, the due date depends on when wages are paid.  For pay days on Wednesday, Thursday, or Friday, the deposit is due on or before the following Wednesday.  For pay days on Saturday, Sunday, Monday, or Tuesday, the deposit is due on or before the following Friday.

Accumulated employer federal withholding, Social Security and Medicare taxes of $100,000.00 and over in one single day must be deposited the next banking day after accumulation, irrespective of the preceding.

Electronic Federal Tax Payment System (EFTPS)

Employers must make deposits electronically.  If your required tax deposits are not made via EFTPS, a penalty of 10% of the taxes deposited will be incurred.  The IRS has begun enforcing penalties for non-compliance.  If you have not enrolled in the EFTPS program, please contact us immediately.

Earned Income Credit

Each employer is required to notify any employee who has not had income tax withheld from wages and who has not claimed to be exempt from withholding that they may be eligible for the earned income credit.  The notice must be given by hand or delivered by first class mail within a week, before or after the Form W-2 is furnished, or included with the Form W-2.  The notification must contain all information described in Notice 797 from the IRS.

Small Business Health Insurance Tax Credit

Small employers may be eligible to claim a tax credit for a percentage of the premiums the employer paid for health insurance in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.  Eligible employers must not exceed the maximum number of full-time equivalent employees and average annual wages.

Contact an Anders advisor with any questions on how these amounts affect you.

Read Part 1 of the Annual Payroll and Withholding Update.
Read Part 2 of the Annual Payroll and Withholding Update.
Read Part 3 of the Annual Payroll and Withholding Update.
Read Part 4 of the Annual Payroll and Withholding Update.