NEW TAX DEPOSIT RULES FOR SMALL BUSINESSES

As of January 1, 2005, the IRS increased the minimum threshold for Federal Unemployment Tax Act (FUTA) deposits. Under the previous rule, employers were required to make a quarterly deposit for unemployment taxes if the accumulated tax exceeded $100. Now the threshold is $500.

The IRS estimates that this change will lighten the load for more than 4 million small businesses. Assuming an employer makes timely state unemployment tax payments, the most that the IRS will collect from employers per employee is $56 per year. Before the threshold was increased, most employers with two or more employees had to make at least one federal tax deposit a year. Now employers with eight employees or fewer will be freed from the requirement of making as many as four FUTA deposits per year