California Business get Year End Employer Tax Surprise.
As reported to me by Gusto my California small business clients with employees are in for a nasty year end surprise.
An increase in 2024 Federal Unemployment Tax (FUTA). FUTA is retroactively increasing for 2024 by 0.9% for any wages paid in California and New York—the maximum increase will be $63 per employee working in each of the impacted states. We’ll let you know the exact amount closer to the debit date.
Why is this happening??
During the COVID-19 pandemic, these states took out a loan to cover an unexpected demand for unemployment benefits. Every November, the IRS reviews states with unpaid loans for two consecutive years and increases federal taxes in order to reduce the loan balance. To repay this loan, employers in California and New York will need to pay a higher FUTA rate for 2024.?Learn more.?
Is this a one-time or recurring increase?
This is a one-time debit for tax year 2024. However, if the state still has an outstanding loan in November 2025, your FUTA taxes may increase again for tax year 2025. If that happens, we’ll let you know at the end of 2025.
The year end is a perfect time to consider a new payroll service. If you are unhappy with your current payroll company or just want to see what is out there, consider Gusto or reach out to your CPA (or me).
Happy holidays(?)