Changes in FUTA Tax Rate and Job Training Tax Exemptions
The 0.10% Arizona Job Training Tax (JTT) funds the Arizona Job Training Program administered by the Arizona Commerce Authority. It is payable to the Arizona Department of Economic Security with employers' quarterly UI Tax and assessed on the same taxable wage base, i.e., the first $7,000 of gross wages paid to each employee each calendar year. Arizona Revised Statutes (A.R.S.) § 23-769, which established the JTT effective January 1, 2001, exempts certain specified UI Tax-rated employers from paying JTT only when the Federal Unemployment Tax Act (FUTA) tax rate at the time the taxable wages were paid is above 6.0%. The FUTA rate is governed by the Internal Revenue Code, Section 3301, which provides that the rate will be 6.2% through the first six months of calendar year 2011 and 6.0% thereafter.*
As a result of the decrease in the FUTA rate to 6.0% effective July 1, 2011, the above-mentioned JTT exemptions for certain UI Tax-rated employers expired on July 1, 2011. However, A.R.S. § 23-769 has since been amended so that the above-mentioned JTT exemptions have been reinstated, for tax filing purposes, effective July 1, 2012 and until the FUTA rate is reduced to less than 6.0%. Therefore, ALL UI Tax-rated employers are subject to JTT on taxable wages paid from July 1, 2011 through June 30, 2012. However, some are exempt from JTT, based on their assigned UI Tax rate, on taxable wages paid prior to July 1, 2011 and/or after June 30, 2012 (view JTT-exempt UI Tax rates for current and prior years 185 KB PDF). Reimbursement employers always have been and continue to be exempt from JTT.
UI taxpayers who were exempt from JTT in the first and second quarters of 2011 continue to be exempt from JTT on taxable wages they paid in those quarters. In other words, for 2011: (1) if such an employer did not meet the $7,000 taxable wage base of an employee in the first or second quarter, the employer is subject to JTT only on taxable wages paid to that employee in the third and fourth quarter; (2) if the employer did meet the taxable wage base of an employee in the first or second quarter, the employer is not subject to JTT on wages paid to that employee in the third or fourth quarter.
UI taxpayers who are exempt from JTT in the third and fourth quarters of 2012 remain subject to JTT on taxable wages they paid in the first and second quarters of 2012.
* Employers pay FUTA Tax to the I.R.S. annually, in January of the year following the year for which taxes are due. They receive a 5.4% credit against their FUTA obligation for paying their State UI Tax (also known as SUTA Tax). This credit effectively reduces the FUTA rate to 0.8% on taxable wages that were paid prior to July 1, 2011, and to 0.6% on taxable wages that are paid after June 30, 2011. However, the SUTA Tax credit against Arizona employers’ FUTA Tax on taxable wages paid in 2012 may be reduced by 0.30%. This will in effect raise their 2012 FUTA Tax rate by 0.30%. For more information on this, go to the Special Assessment information page.
NOTE: All Arizona UI taxpayers are subject to the following, payable quarterly to DES, on taxable wages they pay in 2012:
On taxable wages paid from January 1, 2012 through June 30, 2012 by all UI taxpayers:
On taxable wages paid from July 1, 2012 through December 31, 2012 by UI taxpayers who are not exempt from Job Training Tax:
On taxable wages paid from July 1, 2012 through December 31, 2012 by UI taxpayers who are exempt from Job Training Tax:
The amount of Surcharge due is entered on Line 7, Part C of the quarterly Unemployment Tax and Wage Report, form UC-018. A single payment that covers all UI Tax and Surcharge due for the quarter is preferred.