[leglock]

For anyone who has had experience with journalizing employer FUTA expense, please help with the following. As you are aware, employers only need to pay federal unemployment tax on the first 7,000 of wages per employee at the rate of 6%. My question is would you book this expense only in the periods the employee earns his first 7,000 of wages (which would probably mean you are going to incur this expense in only months 1 and 2 because that’s when the average employee will hit 7,000 in wages) or would you book this expense over 12 months.

I ask this because if, for example, you have 500 employees, if you spread the expense out over 12 months vs. booking it in the period the employee earns his 1st 7000 of wages, it can significantly impact the monthly financial statements. The expense is 420 per employee, so that’s 210,000 in expense that is either booked 105,000 in jan and feb each, or 17,500 per month.

At your company, what is the appropriate way to handle this?