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Indiana Pays Back Federal Loan to Avoid Higher FUTA Taxes

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Back in October, we wrote about the states at risk of not meeting the November 10 deadline to pay back their Federal Unemployment Trust Fund loans, which would have raised Federal Unemployment Taxes (FUTA) for businesses operating in those areas. At that time, it looked like California, Connecticut, Indiana, Ohio and the Virgin Islands might be subject to a hike in their FUTA rate. Since that time, there is some good news to report: Indiana paid off their loan balance to avoid a higher FUTA tax rate.[1]

According to an op-ed written by Indiana State Rep. Cindy Ziemke in the Batesville Herald Tribune, she and a group of lawmakers proposed an early payoff option in the state’s budget proposal, which ultimately allowed the state to pay off the remaining $250 million on their loan ahead of the November 10 deadline.[2]

The group of lawmakers who put this plan together initially anticipated they would pay off this loan by 2018, but through structural planning and careful adjustments they were able to pay it off two years ahead of schedule, according to Rep. Ziemke. Paying it off earlier will help the state of Indiana in the long run because rather than paying higher taxes, businesses will be able to put that money towards their business, hiring efforts and overall economic development.[3]

By Rep. Ziemke’s count, paying off the loan this year will save Indiana businesses $327 million in federal unemployment penalties, not to mention the fact that the state is using their own resources for this early repayment, so hardworking taxpayers will not be responsible for the bill. A second article from the Batesville Herald Tribune claims that avoiding these unemployment penalties will save employers approximately $126 per employee throughout the state.[4]

President and CEO of the Indiana Chamber of Commerce, Kevin Brinegar, said his office has heard praise from hundreds of businesses across Indiana for the lawmakers’ efforts to pay off the loan early and relieve them from more taxes.

Not only does this bode well for businesses and employees, Indiana has also set an example as a state that has benefitted from receiving Federal Unemployment Trust Fund loans and has strategically paid it back to help its employers avoid becoming overburdened by taxes.

For additional information on FUTA Taxes, read through this latest legislative update by ADP’s Eye on Washington experts.

Learn More about ADP Employment Tax

Learn More About ADP SmartCompliance® Tax Credits


The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice.  The information and services ADP provides should not be deemed a substitute for the advice of any such professional.  Such information is by nature subject to revision and may not be the most current information available.








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