According to the U.S. Department of Labor (DOL), California, New York, and the U.S. Virgin Islands, could not pay back their federal loans by the November 10, 2024, deadline and will lose the full Federal Unemployment Tax Act (FUTA) credit for 2024 [DOL, Final 2024 Federal Unemployment Tax Act (FUTA) Credit Reductions, rev. 11-12-24].
For 2024, California and New York are subject to a credit reduction of 0.9%. The Virgin Islands is subject to a credit reduction of 4.2% for 2024. California, New York, and the Virgin Islands were also subject to a credit reduction for 2023.
Earlier this year, Connecticut was listed as a potential credit reduction state, but it paid off its outstanding loans by the November 10, 2024 deadline. Though it appears on the final list, the reduction amount is listed as 0.0%.
Tax Due in January
The additional FUTA tax must be deposited by the due date of the 2024 federal Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, which is due January 31, 2025. The 2024 Schedule A (Form 940) will contain the official list of credit reduction states/territories, and the credit reduction total from Schedule A is reported on Form 940. Both forms will be available from the IRS when they are finalized.
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Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for PayrollOrg.
