When it comes to tax rates that change every year, like unemployment tax, figuring out how much to pay for your business can be tough. Paying too little tax can land your business in serious hot water with the IRS. However, paying too much tax may eventually hurt your business’s finances.
There’s a lot that goes into figuring out the specific unemployment tax changes for your business, but here are some key things to consider.
As an employer, you are required to pay unemployment tax for every employee you hire. The federal base wage, or period of pay that you must pay taxes for, is $7,000. Some states may have their own base wage, although Arizona’s is the same as federal in most cases.
The federal tax rate for 2015 is 6 percent of the above $7,000 per employee, or $420 per employee per year, or $105 per employee if paid quarterly. If you were prompt in paying your taxes in full each quarter, you may be eligible for a tax credit of up to 5.4 percent, so you really only pay 0.6 percent for each employee.
Each January, Arizona employers should receive a notice of their tax rate for that year. During a business’s first two years in operation it will typically be charged an unemployment tax rate of 2 percent, which may be adjusted after that period depending on several factors. These include the amount of taxes you’ve already paid, the amount of unemployment benefits charged to you or paid to former employees, and your average annual taxable payroll. Arizona typically does not charge more than 5.4 percent. It may be more when the state unemployment rate is high.
A comprehensive list of changes to Arizona unemployment tax for 2015 can be found here. Statewide, the average rate is 2.4 percent.
Have Questions About Unemployment Tax Changes?
Need help determining your business’s unemployment tax rate? Are you considering hiring a professional accountant to help with your business’s taxes? Give Hacker Accounting a call at 602-375-5251.