What is SUTA tax? SUTA stands for State Unemployment Tax Authority. It is a tax scheme begun by the state governments where employers are required to pay SUTA tax for their employees without deducting any amount for the same from the employees’ salary or wages. Normally the SUTA tax rate for an individual employer is determined by the number of unemployed personnel who make claims to the government.
This tax is almost the same as FUTA tax which is the federal equivalent of the state unemployment authority tax and therefore uses the same principles and rules that are applied by the federal government, including the same set of documents for such application and payment procedures. The major difference is that being a state’s tax, the rates are actually determined by the states and therefore it should not be surprising that different states have different tax rates. In fact, one of the factors that business people look at is the SUTA tax rates of a particular state before they re-locate there.
The state laws require that new business establishments pay the maximum rate of SUTA tax until such a time as a regular payment plan has been established in which case a review of the rates will be done. Once a company establishes a paying pattern, the entire amount paid is channeled into the company’s unemployment account to be used by the company’s unemployed personnel when the need arises.
Whether a state Government is able to help an unemployed person financially will be by and large dependent, on whether the employer met the state tax requirements. The employee will make an application through the employer’s account and ask for aid from the government, in which instance, the government through records of the employer’s tax payment will either furnish such financial aid to that unemployed person or deny that request. The tax refund advance is another option that is available through SUTA Tax.
In a case where the employer defaults from paying this tax, the government may employ various schemes to recover this money from the employer after sufficient notice has been given to such an employer. If the employer does not respond in due time, the state Government will move in to attach that property in which case they can make it open for a tax lien to any prospective individuals and issue the tax lien certificates (a document given to an individuals who pays the accruing taxes on a property for such a period of time as it takes for the owner to pay back his taxes). If the owner is not able to pay back this tax or settle tax debt after a stipulated period of time, the ownership of the property reverts to the holder of that certificate.
An employer may also opt to involve himself in tax free retirement options for the employees in which case, he may choose to make the required contributions to match that of the employees. However, it is always important that an employer settles the tax debt. SUTA tax explains where the government acquires the funds to be able to pay to unemployed people.