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FUTA Credit Reduction Affects Many States

The U.S Department of Labor (DOL) released its long-anticipated list of FUTA credit reduction states for 2013. Employers in these 13 states and the Virgin Islands will experience associated tax increases.

 The standard FUTA rate is 6.0 percent on the first $7,000.00 of wages. Employers in most states receive a credit of 5.4 percent against the rate resulting in net tax rate of 0.6 percent. However, states with federal loans outstanding for two consecutive years must make additional payments to FUTA. As a result, these states will have their FUTA credit amount reduced for 2013 filing as a way to recover the funds still owed to pay back these loans.

 Instead of the standard 5.4% credit allowed, employers in 13 states and the Virgin Islands will have a reduced credit for 2013. The following is a summary of all states with a credit reduction and their net FUTA rate for 2013:

 

State Credit Reduction Percentage Net 2013 FUTA Rate
Arkansas 0.9% 1.5%
California 0.9% 1.5%
Connecticut 0.9% 1.5%
Delaware 0.6% 1.2%
Georgia 0.9% 1.5%
Indiana 1.2% 1.8%
Kentucky 0.9% 1.5%
Missouri 0.9% 1.5%
New York 0.9% 1.5%
North Carolina 0.9% 1.5%
Ohio 0.9% 1.5%
Rhode Island 0.9% 1.5%
Virgin Islands 1.2% 1.8%
Wisconsin 0.9% 1.5%

The credit reduction only applies to employers who pay SUI wages to the states listed above. All other employers will receive the full FUTA credit of 5.4%.

Reprinted with permission from Paychex

If you have any questions regarding the FUTA credit reduction affects, contact our office at 845 485-5510.