^{Updated December 20th, 2022.}

If your business runs out of any of the following states, please continue reading the DOL's recent update concerning FUTA Credit Reductions.                      

California, Connecticut, Illinois, New York, Virgin Islands

Employers with outstanding State Unemployment (Title XII) balances of two or more consecutive years are subject to a reduction of FUTA tax credits. Balances (Statements of Account) not repaid before November 10th of the taxable year will experience a FUTA credit reduction of 0.3%. This increases the effective FUTA rate from 0.6% to 0.9% for all employees. The reduction rate for the Virgin Islands is 3.6%.

If your company has received an assessment bill from your state, pay it in full. FUTA taxes must be received by the IRS by Jan 31, 2022. Fill out the 2022 Federal Form 940 – Schedule A when submitting deposits. Complete instructions are available here.

Further reductions are possible if payment is outstanding following the third and fifth January 1st of an advance.  

Why? States have borrowed heavily from the federal government in recent years in response to the increased unemployment rate, largely due to Covid-19.

The DOL provides a breakdown by state. Any clarifications can be requested by emailing DOL representatives Kevin Stapleton (Stepleton.Kevin@dol.gov) or Dyana Cornell (Cornell.Dyana@dol.gov).