The new year is bringing some big changes for Florida businesses, and they all aren’t what you might have expected. Starting Jan. 1, 2021, employers paying the minimum tax rate for reemployment may see a significant increase in unemployment taxes.
Why the sudden hike in reemployment taxes?
This is in response to the Florida trust fund for unemployment taking a huge dip since March of 2020. Between then and the end of November 2020, the trust went from just above $4 billion to under $1 billion. In response, the state has indicated that the increase is necessary to help replenish the trust so that employees can continue to receive benefits.
So what does this mean for Florida business owners? Careful planning is required. The spike is not something that many business owners expected (or had a lot of time to plan for). This could mean a shift in tax planning and budget adjustments. In addition, employers need to plan for a second increase in the Florida minimum wage this year. As of Jan. 1, minimum wage in Florida is $8.65/hour and will increase to $10/hour on Sept. 1.
How are the increases calculated, and what are the new rates?
How much an employer pays in reemployment taxes is based on a complicated formula that looks at several factors including benefits charges over a three-year period. All employers should have received a Reemployment Tax Rate Notice (form RT-20) by Dec. 22, 2020. It should be noted that layoffs due to the pandemic will not be counted against Florida employers.
The minimum reemployment tax rate for 2021 is .29% or $20.30 per employee. In 2020, this rate was .01% or $7.00 per employee. (The 2020 maximum tax rate of 5.4% for the first $7,000 in wages did not change for 2021.)
This change can be particularly challenging for the small business climate, but your accountant can help with planning. Talk to a business tax professional and an HR consultant to effectively plan ahead for 2021 and beyond.
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