The State of Tennessee is reducing its taxable wage base for unemployment insurance in 2016.
The Tennessee Department of Labor & Workforce Development announced the state’s taxable wage base has fallen from $9,000 to $8,000 as of January 1, 2016. The taxable wage base is the annual amount of wages paid to an employee that is subject to the state unemployment tax.
“This is a step forward for both the economy and employers in the state of Tennessee,” said Linda Davis, Unemployment Insurance administrator. “We have rebuilt the trust fund to a healthy level, allowing the taxable wage base to decrease for employers.”
At the end of 2015 the Tennessee Unemployment Insurance Trust Fund balance was estimated to be over $900 million. This level of funds automatically triggered the lowering of the taxable wage base which applies to employers who pay quarterly state unemployment insurance premiums.
During the Great Recession, Tennessee and other states, saw its Unemployment Insurance Trust Fund became insolvent. As a result of the condition of the fund, the state increased its wage base to $9,000 from $7,000. The legislation included provisions to reduce the tax increase once the fund was restored to “safe” funding level.
The above applies to all Tennessee employers except 501(c)(3) organizations. 501(c)(3)s do not have to pay state unemployment insurance taxes. Many Tennessee nonprofits could save as much as 30 percent more on their unemployment cost by opting out of the unemployment insurance tax system – an advantage provided to them by the IRS. Doing so affords nonprofits unique avenues that allow them to strategically handle unemployment claims administration and unemployment insurance taxes in ways that for-profits can only dream about.
Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.