The Internal Revenue Service will increase the minimum threshold for Federal Unemployment Tax Act deposits, a move that will impact more than 4 million small businesses.
Under new rules effective Jan. 1, 2005, employers are required to make a quarterly deposit for unemployment taxes if the accumulated tax exceeds $500. The current threshold, established in 1970, is $100.
"The new rules will help cut paperwork for millions of small businesses," said IRS Commissioner Mark W. Everson. "The IRS Office of Taxpayer Burden is continually reviewing what other steps we might take that will save money and time for businesses."
The maximum amount the IRS collects from employers per employee is $56 per year, if the employer timely made state unemployment tax payments. The current $100 threshold requires most employers with two or more employees to make at least one federal tax deposit per year. Raising the requirement to $500 will eliminate the requirement to make up to four FUTA deposits yearly for employers with eight employees or less.
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