According to the U.S. Department of Labor, California, Connecticut, Illinois, and New York, along with the U.S. Virgin Islands, could not pay back their federal loans by the November 10, 2022, deadline and will lose the full Federal Unemployment Tax Act (FUTA) credit for 2022 [DOL, Final 2022 Federal Unemployment Tax Act (FUTA) Credit Reductions, rev. 11-10-22].
For 2022, California, Connecticut, Illinois, and New York are subject to a FUTA credit reduction of 0.3% and the Virgin Islands is subject to a FUTA credit reduction of 3.6%. The Virgin Islands was also subject to a credit reduction for 2021.
As of November 3, 2022, five states had outstanding federal unemployment account (FUA) loan balances, but Colorado paid off its loans by the November 10, 2022, deadline. California previously announced that it would be subject to a FUTA credit reduction for 2022.
Tax Due in January
The additional FUTA tax must be deposited by the due date of the 2022 federal Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, which is due January 31, 2023. The 2022 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.
Interested in more state and local payroll coverage? APA’s PayState Update eNewsletter is perfect for you.
Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for the APA
