Indiana Unemployment Taxes

In 2008, at the peek of the recession, many states had to take loans from the federal government to meet demands of unemployment funds.  Indiana took the largest of these loans.  The result was a penatly in the form of a reduced credit for state unemployment taxes paid on the federal unemployment tax form.  Business have been paying an extra 1.8% in federal unemployement taxes on each of their employees first $7,000 of wages since.

In October, Governer Pence announced that Indiana now had the funds to payoff the remainder of this loan.  The result is the removal of the 1.8% credit reduction, starting in 2015.  For an employer with $35,000 in taxable wages (5 employees making over $7,000) the tax saving for 2015 will be $630.

Indiana had to take the loan because the state unemployment fund was wofully underfunded.  In order to correct this Indiana increased the taxable wage base by $2,500 (from $7,000 to $9,500) and increased all business tax rates.  Business in industries seeing the largest amount of unemployement claims (construction, specialty contractors, etc.) saw the biggest increase.  The highest rate before the loan was 6.2%.  After the loan rates are as high as 9.484%.  Now that the loan is paid off, business taxpayers with positive experience accounts should see a signifant decrease in there experience rate for 2016.  I have already dealt with two contractors whose rates decreased 2%.  That is a $190 savings per full time employee. For Indiana business this is welcome news for the new year!