With the holidays quickly approaching, we wanted to share the FUTA information we received today so our California businesses have it on their radars.
The U.S. Department of Labor has announced California as the only state that is subject to
FUTA credit reduction this year.
The reduction in the FUTA tax credit for California companies is 1.8% and is retroactive to
January 1, 2016. This will result in employers paying up to an additional $126 in FUTA tax for
each California employee.
What is a credit reduction state?
A state is a credit reduction state if it has taken loans from the federal government to meet its state unemployment benefits liabilities and has not repaid the loans within the allowable time frame. A reduction in the usual credit against the full FUTA tax rate means that employers paying wages subject to UI tax in those states will owe a greater amount of tax.*
Learn more about FUTA Credit Reduction on the IRS website.