@096 CHAP 5

        ÚÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄ¿
        ³     FEDERAL AND STATE UNEMPLOYMENT TAXES     ³
        ÀÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÄÙ

With relatively few exceptions, all businesses with employ-
ees must pay unemployment taxes, both federal and state.
The federal tax (and in most states, the state tax as well)
is imposed entirely upon the employer.  The federal unem-
ployment tax in 1993 is nominally 6.2% of the first $7,000
of annual wages per employee.  In practice, however, the
federal rate is usually only 0.8% (for a maximum tax of $56
per employee), since a credit for up to 5.4% is given for
state unemployment taxes paid, or if the employer has a
favorable "experience rating" for state unemployment tax
purposes in @STATE.

@IF120xx]NOTE RE UNEMPLOYMENT TAX FOR @NAME:
@IF120xx]------------------------------------------------------------
@IF120xx]Since you are operating as an owner of an unincorporated
@IF120xx]business, rather than as an employee of a corporation, your
@IF120xx]personal earnings from the business are not subject to state
@IF120xx]or federal unemployment taxes.  This will save your firm sev-
@IF120xx]eral hundred dollars a year of such taxes on your business
@IF120xx]earnings, as compared to what you would pay if you were oper-
@IF120xx]ating @NAME as a corporation.
@IF120xx]------------------------------------------------------------
@IF120xx]
    . FEDERAL UNEMPLOYMENT TAX ("FUTA").

Your business will be required to pay FUTA taxes for any
calendar year if during any calendar quarter of the current
or preceding calendar year you paid wages of $1,500, or if
during either year you had one or more employees for at
least a portion of a day during any 20 different calendar
weeks during the year.  You must count individuals on va-
cation and sick leave in making this determination.  Need-
less to say, this will cover almost any business that has
even one employee, even part-time.

If the FUTA liability during any of the first 3 calendar
quarters is more than $100, you must deposit the tax with a
federal tax deposit coupon at an authorized bank during the
month following the end of the quarter.  If the tax is $100
or less, you are not required to make a deposit, but you
must add it to the taxes for the next quarter.  For the
fourth quarter, if the undeposited FUTA tax for the year is
more than $100, deposit the tax with a tax deposit coupon
by January 31.  If the balance due at year-end is $100 or
less, either deposit with the coupon or mail it in with
your federal unemployment tax return (Form 940) by January
31.  Form 940 is not due until February 10 if all of the
FUTA tax for the prior year has already been deposited when
due.

NOTE FOR SMALL EMPLOYERS:  In 1989, The IRS introduced a
new Form 940-EZ, a greatly simplified FUTA return for small
employers.  In general, the small employers who can use the
simplified 940-EZ form are those who:

        . Pay unemployment tax to only one state;

        . Pay all state unemployment taxes by Form 940-EZ's
          due date; and

        . Whose wages subject to FUTA are also taxable for
          state unemployment tax purposes.


    . @STATE UNEMPLOYMENT TAX.

The state also imposes an unemployment tax, which meshes
closely with the federal unemployment tax.

@CODE: HI CA NM AZ FL IN MS SC GA NY TN MA
@CODE:NF
The state unemployment tax is imposed on the employer, not
the employee, in @STATE.

The unemployment tax rate for a new employer in the state
of @STATE is:

@CODE:OF
@CODE: HI
    . RATE:       1.7% of the wage base (1993 rate)

    . WAGE BASE:  The first $23,900 of wages per employee
                  (for 1993)

@CODE:OF
@CODE: CA
    . RATE:       3.4% of the wage base (1993 rate)
                  (Plus 0.1 employment training tax,
                  usually)

    . WAGE BASE:  The first $7,000 of wages per employee
                  (for 1993)

@CODE:OF
@CODE: AZ FL IN MS SC GA NM TN
    . RATE:       2.7% of the wage base (1993 rate).

@CODE:OF
@CODE: MA
    . RATE:       3.0% of the wage base (1993 rate).

@CODE:OF
@CODE: NY
    . RATE:       4.3% of the wage base (1993 rate).

@CODE:OF
@CODE: AZ FL IN MS SC TN NY
    . WAGE BASE:  The first $7,000 of wages per employee
                  (for 1993).

@CODE:OF
@CODE: GA
    . WAGE BASE:  The first $8,500 of wages per employee
                  (for 1993).

@CODE:OF
@CODE: NM
    . WAGE BASE:  The first $12,600 of wages per employee
                  (for 1993).

@CODE:OF
@CODE: MA
    . WAGE BASE:  The first $10,800 of wages per employee
                  (for 1993).

@CODE:OF
@CODE: HI CA NM AZ FL IN MS SC GA NY TN MA
The tax rate may be higher or lower after the employer has
been in business long enough to establish an "experience
rating."  The tax may also vary considerably from year to
year based on the level of solvency of the state's unemploy-
ment insurance funds.  @STATE unemployment tax returns
are due at the end of the month following the end of each
calendar quarter, and tax due in full at such time.

@CODE:OF
@CODE: HI
The Hawaii unemployment tax form is Form UC-B-6.  Blank
forms and instructions are mailed to each registered employ-
er about 15 days before the end of each calendar quarter by
the Unemployment Insurance Division.  It should be mailed,
with payment, to the state District Tax Office in the appro-
priate county.

Employers subject to Hawaii unemployment tax are generally
those that are subject to Federal Unemployment Tax Act
(FUTA) coverage.  A Hawaii business entity should file
Form UC-1, Report to Determine Liability Under the Hawaii
Employment Security Law, not later than 20 days after first
hiring an employee.  Determination of liability will be
made and an employer subject to the tax will be assigned a
state identification number and tax forms will be furnished.
Form UC-1 can be obtained from the Department of Labor and
Industrial Relations, Unemployment Insurance Division, lo-
cated at 830 Punchbowl Street in Honolulu.

Note that an employer will be assessed a $10 penalty for
each failure to report a new hire or the separation from
employment of an employee within 5 working days after hir-
ing or separation.

New hires are reported on Form UC-BP-5(A), while individual
separations from employment are reported on Form UC-BP-5.

@CODE:OF
@CODE: NM
The state unemployment tax return is Form ES-903A, which
is filed with the New Mexico Employment Security Department.

@CODE:OF
@CODE: CA
@CODE:NF
The state unemployment tax return is Form DE 3, which is
also used to report California personal income tax and SDI
withheld by employers.  The Form DE 3 you file must be pre-
headed with your name, state account number and tax rate
by the Employment Development Department (E.D.D.).  If you
have registered with E.D.D., you should automatically re-
ceive the preheaded form before the quarterly filing dates,
but you are responsible for making sure you obtain it in
time.

California unemployment tax applies, in general, to any em-
ployer that pays more than $100 in wages in any calendar
quarter.  If you are required to pay California unemploy-
ment tax, you must register as an employer with the E.D.D.
on Form DE 1 to obtain a state employer I.D. number.

NEW REPORTING REQUIREMENT WHEN HIRING EMPLOYEES.  As of
April 1, 1993, many California employers are required to
report all new hires, rehires, or returning employees to
the Employment Development Department within 30 days of
their being hired or rehired, on EDD Form 34.

The purpose of this new reporting requirement is to help
the state track down parents who are delinquent on their
child support payments.  (But it's just one more piece of
paperwork from for employers, required by Big Brother....)

This new reporting requirement applies to employers in the
following categories, who have 5 or more employees:

  . Automotive dealers and gasoline service stations;

  . Automotive repair, services and parking;

  . Building construction -- general contractors and
    operative builders;

  . Business services;

  . Construction -- special trade contractors;

  . Eating and drinking places;

  . Engineering, accounting, research, management and
    related services;

  . Health services;

  . Heavy construction other than building construction-
    contractors;

  . Holding companies and other investment offices;

  . Hotels, rooming houses, camps, and other places of
    lodging;

  . Landscaping and horticultural services;

  . Motion pictures;

  . Motor freight transportation and warehousing;

  . Water transportation;

  . Wholesale trade -- durable good, or nondurable goods.

@IF009xx]Since your business has fewer than 5 employees, it is not
@IF009xx]necessary for @NAME to file Form 34.
@IF005xx]NOTE:  @NAME has @EMP employees.
@IF005xx]
@IF005xx]Accordingly, you may have to file Form 34 if you are engaged
@IF005xx]in any of the business activities enumerated above.