Discussion:S Corp paying UI
From TaxAlmanac
| Revision as of 02:45, 2 August 2009 Actionbsns (Talk | contribs) (Natalie, I think) ← Previous diff |
Current revision LJACPA (Talk | contribs) (Every year NC in) |
||
| Line 41: | Line 41: | ||
| {{ForumReplyPost|UserID=Actionbsns|Date=2 August 2009|Text=Natalie, I think that's true in most states, UI is experience rated. Hawaii's wage limit fluctuates more than I've seen elsewhere, which surprised me when I first moved here. California, mirrors the Federal government in that the taxable wage limit was and I believe still is, $7,000. The rate changes as an employer experiences higher events of unemployment. I spoke to the DOL about a year ago, when the wage base dropped to $13,000, they implied that it was going to stay there for sometime because it had been so high for so long. Shortly thereafter, unemployment rates increased substantially, so I'm curious what we'll be seeing in the new year. But even when the wage base is higher, there needs to be consideration given to the cost of FUTA in the event SUTA isn't paid, it may not be so cost effective to opt out of the state program, and once you have done so, you can't change your mind that easily.}} | {{ForumReplyPost|UserID=Actionbsns|Date=2 August 2009|Text=Natalie, I think that's true in most states, UI is experience rated. Hawaii's wage limit fluctuates more than I've seen elsewhere, which surprised me when I first moved here. California, mirrors the Federal government in that the taxable wage limit was and I believe still is, $7,000. The rate changes as an employer experiences higher events of unemployment. I spoke to the DOL about a year ago, when the wage base dropped to $13,000, they implied that it was going to stay there for sometime because it had been so high for so long. Shortly thereafter, unemployment rates increased substantially, so I'm curious what we'll be seeing in the new year. But even when the wage base is higher, there needs to be consideration given to the cost of FUTA in the event SUTA isn't paid, it may not be so cost effective to opt out of the state program, and once you have done so, you can't change your mind that easily.}} | ||
| + | |||
| + | {{ForumReplyPost|UserID=LJACPA|Date=2 August 2009|Text=Every year NC increases the SUTA wage base. $19,300 for 2009.}} | ||
Current revision
Discussion Forum Index --> Advanced Tax Questions --> S Corp paying UI
Discussion Forum Index --> Tax Questions --> S Corp paying UI
| 31 July 2009 | |
| Hello everyone,
I just read an article regarding s/h of an s-corp being denied unemployment insurance when business slowed down to a halt. I have a few single s/h of S-Corp that are getting paid wages and paying payroll taxes. Why are they paying Unemployment insurance if they cannot collect on it. Furthermore, why is their unemployment rate goes up and down every year when they've been drawing wages out of their S-Corp, one client for over 20 years, without ever claiming any benefits. The S-Corp for that particular client only has two employees, husband & wife, while she has an outside job besides her being the secretary of the corp. Thank you. | |
Death&Taxes (talk|edits) said: | 31 July 2009 |
Unemployment rates are set by State labor conditions. Their experience rate may help condition some raises in the rate, but only so much.
Your client has found the Catch-22 of being incorporated: the inability to lay oneself off and collect, yet the payments are due under law. Yet imagine how the system could be gamed by seasonal businesses like tax preparation! Does he pay workmen's compensation insurance? Many states allow non-coverage of officer/shareholders, but here in NJ I must pay over $600 to cover myself for a work-place accident that will probably never happen. In addition, I pay unemployment. | |
| 31 July 2009 | |
| In NYS you can also opt out of Workers Comp and disability. You can also collect unemployment if the Corporation is closed. Def Catch-22.
Does it work the same way for C-Corps? | |
Death&Taxes (talk|edits) said: | 31 July 2009 |
| When I was in NY with a C Corp, Fred, I opted out of WC but my insurance man said the disability is a good, cheap policy. PA also permits you to opt out of WC but provides no disability. NJ on the other hand......
When I talk to clients about form of entity, I tell them they will have to lay out x per year and never collect......no sure they can collect if they close to retire and collect Social Security. | |
| 31 July 2009 | |
| As BLRGCPA pointed out the other day, maybe you have to also resign with the Secretary of State as an officer of the corp (and someone else is elected officer). | |
| July 31, 2009 | |
| In IL, I had one guy collect since he shut down the biz, and was told that that was the only way. You can collect ONE TIME. | |
Actionbsns (talk|edits) said: | 31 July 2009 |
| I have a C-corp owner who laid himself off because times are so bad, collects unemployment and volunteers his time to the corp. He went down laid it on the table to the UI people and they seem happy with it. He only gets the one check though.
Another thing to think about with UI befor opting out of the state programs is the effect it has on FUTA. If you can't take the credit for SUTA on the 940, then the FUTA rate increases substantially. I have one client who did this and last year they were socked with the highest FUTA bill I've ever seen for a two people biz. They can't change it for a couple more years because in opting out of the state plan they agreed to make that choice for a certain period of years. In Hawaii the rates and limits on SUTA are so low that opting out of is just not cost effective. | |
| 1 August 2009 | |
| Thank you all for your input. Typical government rip-off system designed. | |
| August 2, 2009 | |
| Hawaii has a table that is used for rates. I imagine other states do the same thing. The state picks the rate schedule they're going to use for any given year, e.g., A, B, C, etc. and then they calculate the reserve ratio. If a company does not meet the reserve requirements for the rate schedule selected, they end up paying the tax. That's why the rates fluctuate. [1]
The other part that has an impact on how much a business will pay is the maximum amount of taxable wages. In Hawaii many times it makes sense to decline the state unemployment because the wage base is so high. This is true especially for businesses that are just starting out because they have no reserves. For years we had one of the lowest rates of unemployment in the nation and taxable wages of $20,000 to $30,000 or more. Now that the wage base is $13,000, unemployment is up. If I were a gambler, I'd bet that next year's taxable wage base will increase substantially. By contrast, taxable wages for FUTA are only $7,000. | |
| August 2, 2009 | |
| One more thing, in Hawaii a 50%-50% ownership between a husband and wife team is allowed to opt out of unemployment insurance. A 100% owner is not allowed to. Nonprofit organizations are also allowed to opt out as long as they self insure. | |
Actionbsns (talk|edits) said: | 2 August 2009 |
| Natalie, I think that's true in most states, UI is experience rated. Hawaii's wage limit fluctuates more than I've seen elsewhere, which surprised me when I first moved here. California, mirrors the Federal government in that the taxable wage limit was and I believe still is, $7,000. The rate changes as an employer experiences higher events of unemployment. I spoke to the DOL about a year ago, when the wage base dropped to $13,000, they implied that it was going to stay there for sometime because it had been so high for so long. Shortly thereafter, unemployment rates increased substantially, so I'm curious what we'll be seeing in the new year. But even when the wage base is higher, there needs to be consideration given to the cost of FUTA in the event SUTA isn't paid, it may not be so cost effective to opt out of the state program, and once you have done so, you can't change your mind that easily. | |
| 2 August 2009 | |
| Every year NC increases the SUTA wage base. $19,300 for 2009. | |
