2013 Federal Unemployment Tax Act (FUTA) Credit Reductions
What is a Credit Reduction State?
Some states take loans from the Federal Unemployment Trust Fund if they lack the funds to pay unemployment insurance benefits for residents of their states. If a state has outstanding loan balances for two consecutive years, the FUTA credit rate for employers in that state will be reduced until the loan is repaid, ultimately requiring employers to pay additional unemployment tax when filing Form 940 and Schedule A for 2013, which will be due by January 31, 2014.
How does Credit Reduction Affect FUTA Employment Taxes?
However, the result of being an employer in a credit reduction state is a higher tax due on the Form 940. FUTA credit reduction states will see an increase in their FUTA taxes retroactive to January 1, 2013. The reduction in FUTA tax credit is 0.3% for the first year and an additional 0.3% for each succeeding year until the loan is repaid.
Credit Reduction States for 2013
The table below lists the 14 credit reduction states for 2013.
When is FUTA Tax Due and How is it Reported?
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