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States Face FUTA Credit Reduction for 2024

States Face FUTA Credit Reduction for 2024

Due to ongoing economic conditions, some states had to borrow money from the federal government in order to meet Unemployment Insurance benefit obligations. All states have been able to repay the loan with the exception of California, New York and the Virgin Islands. Because of this, there will be a reduction in the credit some employers receive toward their Federal Unemployment Tax Act (FUTA) taxes for the calendar year 2024. The increased revenue associated with this reduced credit will be used by the federal government to repay the loan.

Under the Federal Unemployment Tax Act (FUTA), employers typically pay an annual FUTA tax rate of only 0.6% because the 6.0% tax rate is offset by a federal credit of 5.4%. However, by law, after a state has had an outstanding loan balance for two consecutive years they will face a reduction in the 5.4% credit if the loan is not paid by November 10 in the same year.

What does this mean?

If you have employees in these states, Payroll Solutions will recover the FUTA amounts due by processing a one-time adjustment run. If applicable, you will be notified of the date and amount of the FUTA adjustment.

State Credit Reduction

  • California 0.9%
  • Connecticut 0.9%
  • New York 0.9%
  • The Virgin Islands 4.2%

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