2014 FUTA Credit Reduction

Understanding The FUTA Credit Reduction

At the end of November in 2014, the U.S. Department of Labor notified the IRS that California employers (along with employers in 7 other states) were not eligible to receive the full available credit towards their FUTA tax rate due to the states’ outstanding Federal loan balances.*As a result, employers in these states had an additional FUTA tax amount on their 2014 year end form 940. This is not a correction to previous quarters; rather, it is a modification to the year-end tax reconciliation. We are expecting a similar announcement in late November of 2015 for the 2015 tax year.

For payroll clients, OmegaComp HR will calculate the appropriate tax that is needed, collect the additional amount on your final scheduled payroll of 2015 or first payroll of 2016, and report the tax on your 2015 Form 940. While we currently do not know what that percentage is until they announce it, we expect it to be similar from last year. We will be sending out communications with all of our payroll clients in early December to help them prepare.

If you do not currently use our payroll services, please contact your payroll provider for assistance.

As a general estimate, the maximum amount in 2014 was $84.00 per CA employee. We anticipate the rate will be similar. As with any tax related item, we recommend you consult your tax adviser with specific questions related to how the changes may affect your tax situation.

Final 2014

FUTA Credit Reduction List

State Credit Reduction
California 1.2%
Connecticut 1.7%
Indiana 1.5%
Kentucky 1.2%
New York 1.2%
North Carolina 1.2%
Ohio 1.2%
Virgin Islands 1.2%