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Important Employer Updates

2013 State Unemployment Tax Rates

The 2013 state unemployment tax rate table can now be accessed on the DEW website here.

Businesses should expect to receive their specific rates in mid to late December.

State unemployment taxes in 2013 will be assessed on the first $12,000 in wages. For more information about state unemployment taxes visit this page or contact rateinfo@dew.sc.gov.

FUTA Credit Reduction Avoidance

S.C. businesses that pay their state unemployment taxes on time and in full can receive up to the full 5.4 percent credit on their federal unemployment taxes (FUTA) for 2012.

The Palmetto State this month received conditional approval from the U.S. Department of Labor to avoid a potential 0.9 percent credit reduction.

Federal law requires a reduction in the FUTA tax credit when a state has outstanding federal unemployment loans for two consecutive Januarys and has not made sufficient voluntary payments towards the loan and other solvency improvement measures. However, borrowing states that meet certain criteria can formally ask the Department of Labor for the credit reduction to be avoided.

Part of the criteria is that South Carolina makes a voluntary payment of $106.5 million towards the outstanding loan balance before Nov. 9. The state made this payment in August.

It is anticipated that the state will continue to avoid these federal penalties each year as South Carolina continues to pay down its loans. The state is on track to have all loans repaid by 2015.

Deadline Approaches for Wage and Contribution Reports

Businesses, you have just a few weeks to file your wage and contribution reports and pay Unemployment Insurance (UI) taxes for the third quarter. The deadline is Oct. 31, and the easiest way to file and pay is through SC Business One Stop (SCBOS).

Available 24 hours, seven days a week, SCBOS is the quickest, most cost-effective way to take care of all your DEW-related business transactions. In addition to submitting quarterly wage and contribution reports and paying taxes, you also can respond to UI claims and employer audit notices.

Many S.C. businesses received revised 2012 revised tax rate notices the last week of September, and these rates should be used when filing third and fourth quarter reports. For the revised rate table, click here. To see the estimated cost per employee, see the table on this page.

Because of $77 million in state general fund appropriations, tax rates were recalculated and will save impacted businesses about 12 percent for the year compared to the original 2012 rates.

For more information about SCBOS, contact the SCBOS help desk at 803.898.5690 or call the DEW Contribution Unit at 803.737.3080.

2012 FUTA Credit Reduction Information

Federal Unemployment Tax Act (FUTA)

Employers pay federal unemployment taxes on the first $7,000 of each worker’s annual wages. The FUTA tax for 2012 is a flat rate of 6.0 percent. However, businesses that pay their state unemployment taxes on time and in full can receive up to a 5.4 percent credit if the state is not subject to any credit reductions. Therefore the net FUTA tax rate is typically 0.6 percent.

Credit Reduction

Federal law requires a reduction in the FUTA tax credit when a state has outstanding federal unemployment loans for two years and has not made sufficient voluntary payments towards the loan. The reduction in the tax credit is 0.3 percent for the first year and an additional 0.3 percent for each succeeding year until the loan is repaid or other avoidance criteria are met.

2012 is the third year that South Carolina has had an outstanding federal loan balance. The official credit reduction amount for 2012 would likely be 0.9 percent. Therefore, the net FUTA tax could be 1.5 percent for wages paid in 2012 if South Carolina does not meet certain avoidance criteria.

Avoidance of Federal Credit Reduction

South Carolina has submitted an initial application with the U.S. Department of Labor (DOL) certifying that the state meets certain criteria required to avoid the credit reduction in 2012. A part of the criteria is that South Carolina must make a voluntary payment of $106.5 million towards the outstanding loan balance prior to November 9, 2012. The state made this payment in August, more than two months in advance. 

South Carolina will make its final application for avoiding the credit reduction by October 15, 2012 and should receive approval from DOL in mid-November.

The Internal Revenue Service (IRS) will publish a list of credit reduction states after DOL makes its certifications in November and will have additional information available about completing the federal 940 tax forms. For more information from the IRS on FUTA, click here.

2012 Legislation Impacting Unemployment Insurance Taxes

In the FY2012-13 budget, the SC General Assembly appropriated $77 million to the Department of Employment and Workforce (DEW) to make repayments on outstanding loans. Funds received from the General Assembly will reduce the unemployment insurance tax rates for businesses.

The average savings for businesses in tax classes 2-20 will be approximately 12.3 percent over original 2012 tax rates (see table below for more detail).

By late September, businesses will have received a revised tax rate notice. The revised notice will show the new tax rate that businesses should use when paying their third and fourth quarter taxes in October 2012 and January 2013. Remember that the easiest and fastest way to file quarterly reports and pay taxes is through South Carolina Business One Stop. Visit www.scbos.sc.gov to sign up for a free account.

Since first and second quarter taxes will have been paid at the higher rate, businesses will receive credits on any overpayments. The revised rate notice will show any applicable credit that the business has received.

Due to federal regulations, refunds will not be available for first and second quarter taxes. Because these taxes were paid accurately under the law that was in effect at the time they were paid, only credits can be issued for overpayments. Credits can be used against any future unemployment tax liability and do not expire.

Impact of General Fund Appropriations on SUTA Rates 2012

Below is the estimated cost per employee for 2011 revised tax rates, 2012 under the original plan, and the revised 2012 rates with the General Fund appropriation.

For more information contact the Contribution Section by phone at 803.737.3080 or email at rateinfo@dew.sc.gov.