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FUTA Credit Reduction

2011 FUTA Credit Reduction
Several states have been identified as Credit Reduction States for the FUTA (Federal Unemployment Tax Act) tax, retroactive to January 1, 2011 and will be due on Federal IRS Form 940 by January 31, 2012. Employers in these states will be subject to a reduction in FUTA credit resulting from unpaid federal loans. Typically, employers pay federal unemployment taxes on the first $7000.00 in wages paid to each employee. Federal unemployment tax on taxable wages through June 30, 2011 was 6.2%. However, the IRS allows for a credit of 5.4% in effect making the rate .8%. This credit is allowed due to payment of state unemployment tax. When state unemployment insurance funds are depleted then states can borrow from the federal unemployment fund. The IRS requires the states to repay this money within 2 years. When this does not happen the Federal credit reduces by .3% each year until the debt is repaid, ultimately, increasing the Federal tax rate on wages paid.
Employers in these states below will be subject to a reduction in FUTA credit resulting from unpaid Federal loans.
State Credit Reduction
Arkansas 0.3%
California 0.3%
Connecticut 0.3%
Florida 0.3%
Georgia 0.3%
Illinois 0.3%
Indiana 0.6%
Kentucky 0.3%
Michigan 0.9%
Minnesota 0.3%
Missouri 0.3%
North Carolina 0.3%
New Jersey 0.3%
Nevada 0.3%
New York 0.3%
Ohio 0.3%
Pennsylvania 0.3%
Rhode Island 0.3%
Virginia 0.3%
Wisconsin 0.3%

AmCheck will be handling the tax payment by doing a one-time adjustment . . .
AmCheck is diligently working on our clients' year-end filings which includes identifying the additional FUTA amounts due. The additional FUTA tax owed for clients in credit reduction states, identified above, will be drafted with the quarter and year-end adjustments and remitted to the IRS in the appropriate time frame and reported as required on the 940 returns. For more information directly from the IRS Click Here

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