- [Instructor] Unless you enjoy giving Uncle Sam money,
your goal when dealing with business taxes
should be to minimize your tax liability, right?
One place where this is eminently feasible is SUTA.
SUTA is a big tax each quarter,
especially for firms with a lot of employees,
restaurants, retailers, many service businesses, et cetera.
All businesses have their own unique individual SUTA rate.
That rate differs depending on the history of your firm.
Your goal is to minimize that rate.
This is the rates for Connecticut, for example.
So what we see is that over the last decade or so,
the taxable base for SUTA
in Connecticut has been about $15,000.
That's fairly typical.
We now have three separate rates.
The new employer rate is simply the rate
that new employers without any history pay.
After the first couple of years,
the state will decide whether you're a business
that tends to fire a lot of people,
or has a lot of turnover, in which case
you'll have a higher rate, or whether you're a business
that has lower turnover, and they'll set the rate
for your business based on that.
The minimum rate is the minimum rate that you can achieve.
You want your rate to be as low as possible.
Now, in Connecticut, that minimum rate
in recent years has been 1.9%.
In other states, that differs.
I know of some businesses in other states
where they're SUTA rate is 0.1%.
The maximum rate in Connecticut is 6.8%.
Now remember, this is essentially
a percentage of your payroll.
At least for the first $15,000 in wages.
So this can be a pretty significant chunk of change.
If you have $100,000 in payroll for say a restaurant
in a particular quarter, that might add up to somewhere
between $1,900 and $6,800 in any given quarter.
In order to minimize your SUTA burden,
you want to do three things.
Number one, minimize employee turnover and quitting.
The reason for this is if you have a lot of employees,
even if they quit, you're still going to have
to hire somebody new, and that restarts the clock
on the taxable wage base here in column two.
So, Susie left the firm after three months.
Now, you've got to hire Susie's replacement.
You've still got to pay taxes on the next $15,000
that you paid to, say, John, Susie's replacement.
So that's the first thing you can do,
minimize turnover and quitting.
Second, reduce the number of people that you fire.
Try to avoid firing people whenever possible.
In general, it's preferable to cut hours or take other
disciplinary action rather than fire someone.
Firing people tends to increase your SUTA rate.
Now, if you fire them for cause,
and if you're very cautious, you might be able
to avoid them being able to file an unemployment claim.
In my experience that's difficult to do.
The burden of proof is usually on the business
to show that there was cause for firing them,
and I've had some pretty egregious cases in my own firm,
where we fired somebody for doing all kinds of bad things,
and they were still able to successfully
file unemployment claims.
So number two strategy for minimizing your SUTA,
reduce the number of people that you fire.
And then number three, minimize your
number of part-time employees.
It's better to have one full-time employee
than two part-time employees.
If you have two part-time employees,
you have to pay SUTA on the first $15,000 for each,
versus just SUTA on the one employee
who's full time and their $15,000.
So that'll help you to save on tax liability for SUTA
on a quarterly basis, if you follow these three strategies.
Now you're ready to reduce your tax liability
and save money for your firm over time.