Tax & Accounting Blog

How to Reduce Your Clients’ SUTA Tax Rate in 2014

CS Professional Suite Payroll Solutions November 1, 2013

Last month, I talked about “credit reduction states,” where employers face increased FUTA tax rates on form 940 of their federal unemployment annual tax return. As I said in last month’s blog, there’s not much you can do to reduce your FUTA rate. 

This month, we’ll look at state unemployment tax, or SUTA. Unlike FUTA, SUTA offers employers in many states a way to reduce their tax rates in 2014. It’s called a “voluntary contribution.”   

A voluntary contribution is essentially an advance payment on next year’s SUTA tax. They’re allowed in 26 states. And in many cases, making a voluntary contribution this year can lower your SUTA rate next year. This is due to the fact that in these states, each employer maintains their own individual balance of SUTA funds. Each employer’s SUTA tax rate is determined in part by their balance, and in many cases, a higher balance results in a lower rate. 

For example, in California, employers can use voluntary contributions to reduce their SUTA rate by up to three rate steps (a rate step is equal to a fraction of one percent).  

Here’s the list of states that allow voluntary contributions, along with each state’s contribution deadline:  

Arizona January 31
Arkansas March 31
California March 31
Colorado March 15
Georgia 30 days after notice
Indiana 30 days after notice
Kansas 30 days after notice
Kentucky 20 days after notice
Louisiana 30 days after notice
Maine 30 days after notice
Massachusetts 30 days after notice
Michigan 30 days after notice
Minnesota 120 calendar days after January 1
Missouri January 15
Nebraska January 10
New Jersey 30 days after notice
New York March 31
North Carolina 30 days after notice
North Dakota April 30
Ohio December 31
Pennsylvania 30 days after notice
South Dakota March 27
Texas 60 days after notice
Washington February 15
West Virginia 30 days after notice
Wisconsin November 30

It’s important to note that some states impose restrictions that can affect your ability to reduce your individual rate. For example, some states (including California) don’t allow voluntary contributions when the state is using tax schedules E or F.  

If you want to determine whether a voluntary contribution could reduce your clients’ SUTA rates next year, it’s a good idea to contact your state’s unemployment office. Ask them for the calculation for your state, and for each client’s individual situation. It just might save your clients some money next year. Be advised, though, that most voluntary contributions are non-refundable. So you’ll want to be absolutely sure that a contribution will reduce next year’s rate before you make it.