Lowering Your Wisconsin State Unemployment Tax Rate
It is rare for companies to have the opportunity to reduce any tax rates, especially considering federal and state budget constraints. However, the Wisconsin Division of Unemployment gives employers the option of making an extra payment to their unemployment account for the purpose of lowering their future Wisconsin unemployment rate. This extra payment is called a "voluntary contribution" and is an often overlooked opportunity to save tax dollars.
A "voluntary contribution" is a payment over and above your required quarterly state unemployment taxes which directly affects the account balance used to determine your next year’s rate. You may only submit a voluntary contribution once per year in November. While it is not always advantageous to make a voluntary contribution, the calculation is straight forward and can yield cost savings. At a time of economic challenges, we recommend all employers consider this very simple opportunity to trim a little overhead from next year’s budget.
The following examples provide a general framework for the voluntary contribution calculation.
Example 1
Small employer with 15 employees earning $20,000 or more
Taxable payroll of $120,000 on the 2010 rate notice
Current unemployment account balance of $4,160
Under this example, the company could make a $40 voluntary contribution in November 2009 that would lower its 2010 unemployment rate, creating a savings of $588 that the Company will likely realize in the first quarter of 2010.
Example 2
Employer with 25 employees earning $20,000 or more in 2009
Expectation of expanding to 50 employees earning $20,000 in 2010
Taxable payroll of $300,000 on the 2010 rate notice
Current unemployment account balance of $11,825
Under this example, the company could make a $175 voluntary contribution in November 2009 that would lower its 2010 unemployment rate, creating an expected savings of $2,640 in 2010.
Most companies will receive their 2010 unemployment tax rate notice in the last week of October so now is the time to act.
There’s more to the calculation than the simple math so we recommend you contact your qualified professional advisor for guidance. Please contact us if you want further information or assistance in planning for your business.
To ensure compliance with Treasury Circular 230, we are required to inform you that any advice concerning U.S. federal tax issues contained on this website is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code and was not written to support the promotion or marketing of any transaction or matter discussed herein. Application of tax regulations is specific to the individual or business and we recommend that you consult a qualified Komisar Brady tax professional for how the above information may apply to you.
