Nineteen states will be paying higher payroll taxes in the the fourth quarter due to a credit reduction on the federal unemployment (940 form) payroll tax return. The current rate for FUTA is .6% if you can claim the full credit allowed for filing the state unemployment returns timely, and paying all tax due by the due date. The credit allowed on the federal return is 5.4%, reducing the actual tax rate from 6% to .6% (paid on the first $7000 of wages for each employee.)
A state is a credit reduction state if it has taken loans from the federal government to meet its state unemployment benefits liabilities and has not repaid the loans within the allowable time frame. The reduction schedule is 0.3% for the first year the state is a credit reduction state, another 0.3% for the second year, and an additional 0.3% for each year thereafter that the state has not repaid its loan in full.
If a state has outstanding loan balances on January 1 for two consecutive years and does not repay the full amount of its loans by November 10 of the second year, the FUTA credit rate for employers in that state will be reduced until the loan is repaid.
The states affected by this credit reduction and percentage of increase are as follows:
| Arizona | 0.3% |
| Arkansas | 0.6% |
| California | 0.6% |
| Connecticut | 0.6% |
| Delaware | 0.3% |
| Florida | 0.6% |
| Georgia | 0.6% |
| Indiana | 0.9% |
| Kentucky | 0.6% |
| Missouri | 0.6% |
| Nevada | 0.6% |
| New Jersey | 0.6% |
| New York | 0.6% |
| North Carolina | 0.6% |
| Ohio | 0.6% |
| Rhode Island | 0.6% |
| Vermont | 0.3% |
| Virgin Islands | 1.5% |
| Wisconsin | 0.6% |
Employers in these states need to budget for the additional tax due January 31, 2013, for the fourth quarter of 2012.
Have questions regarding this tax increase? Feel free to contact our office at 310-534-5577 or [email protected].
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