Published Nov. 16, 2011
S.C. businesses won’t see a huge increase in what they pay in federal unemployment taxes for 2011, the state’s Department of Employment and Workforce says.
On Tuesday, the S.C. agency said that the U.S. Labor Department has given conditional approval to continue receiving full 5.4% credit on business federal unemployment taxes because the state has paid off a big chunk of federal loans needed to cover benefits paid to claimants. Employers have been paying a penalty because the state owed the federal government more than $900 million that was borrowed to keep the unemployment system solvent.
“This is good news for the state’s business community and a positive sign that the state’s unemployment trust fund is back on a path to solvency,” said Erica Von Nessen, assistant executive director for unemployment insurance at the agency.
For wages paid up to the first $7,000 between Jan. 1 and June 30, the effective tax will be 0.8%, while the tax rate for wages paid between July 1 and Dec. 31 will be 0.6%, the agency said.
Taxes are typically paid in January of the following year to the Internal Revenue Service using Form 940, the state agency said. For 2010 taxes, which were paid in 2011, businesses paid at the rate of 1.1% in federal unemployment taxes because the state had not begun repaying $972 million in loans. The loans were needed because the state’s unemployment trust fund went broke in 2009 as the jobless rate soared.
“The increase in solvency and repayments made it possible to avoid any federal tax penalties for this year,” the state agency said. “It is anticipated that the state will continue to avoid these federal penalties each year as the state continues to pay down its loans.”
So far, the state has repaid $184 million in loans and plans to cover the remaining $788 million in 2015.