The Department of Labor has released its listing of FUTA Credit Reduction States for 2012. Read below to find out how this may effect your FUTA tax rate if you live in certain states...
Why is there a credit reduction?
Many states took out Federal Unemployment Trust Fund loans, which are still outstanding, to keep their unemployment benefit programs solvent during recent periods of extended high unemployment. As a result, these states will have their FUTA Credit amount reduced for 2012 filing as a way to recover the funds still owed to pay back these loans, resulting in hight taxes for employers in those states, outlined below.
What does this mean and who is effected?
The standard FUTA rate is 6.0% on the first $7,000 of wages, and employers are able to receive a credit of 5.4% against the rate resulting in a net tax rate of 0.6%.
However instead of the standard 5.4% credit allowed, employers in the following states will have a reduced credit of 5.1% for 2012, making the FUTA tax rate 0.9% in the following states: Arizona, Delaware and Vermont
In addition, employers in the following states will have their credit reduced from 5.4% to 4.8% for 2012, making the FUTA tax rate1.2% in the following states: Arkansas, California, Connecticut, Florida, Georgia, Kentucky, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Rhode Island and Wisconsin
And, lastly, the following states are impacted:
Indiana - employers will have their credit reduced from 5.4% to 4.5% for 2012, making the FUTA tax rate 1.5%
Virgin Islands - Employers will have their credit reduced from 5.4% to 3.9% for 2012, making the FUTA tax rate 2.1%
The credit reduction only applies to employers who pay SUI wages to the states listed above. All other employers that do NOT have a 2012 credit reduction will receive the full FUTA credit of 5.4% and pay a net tax rate of 0.6%
Bookkeeping and tax compliance is more important than ever! It is important to know about these, and other tax updates, as soon as possible to keep your business current. Contact On Call Accountants today to make sure you are always "in the loop" and know what is going on.. Click here to Contact an Accountant Today!