IRS: FUTA to rise to 2.3 percent



EAST HARTFORD — OEM America President David Fernandez is criticizing a newly announced tax that makes Connecticut the most expensive in the country.


Fernandez’s East Hartford-based company provides payroll, human resources, workers compensation and health insurance services to small businesses throughout the state.


The Federal Unemployment Tax Act (FUTA) reimbursement rates for this 2014, just announced by the IRS, charges employers 2.3 percent on employee payrolls.  Most states charge 0.6 percent. The next highest states are Indiana at 2.1 and California at 1.8 percent.


Fernandez observes that some Connecticut small businesses were unprepared for this tax increase. “Lots of businesses that use ADP or Paychex for payroll haven’t been withholding enough this year,” he says. “Those companies are going to have to write a pretty big check next month.”


OEM’s payroll clients are somewhat insulated from this action, since the company has been anticipating this higher rate, and has been withholding accordingly, Fernandez adds. They will still have to pay the higher rates, but will not have the pay all at once.


“We see this kind of business-unfriendly attitudes throughout our business,” Fernandez says. “Fees tacked on to workers compensation, fees added to health insurance — the small businesses we work for feel like they’re a government piggy bank. Our products help them some, but there’s always another agency with its hand out.”


Fernandez urges Connecticut’s leaders to repay the federal unemployment fund, so that the state’s FUTA rates will come back down to normal.