Federal Unemployment Taxes 2016: FUTA Credit Reductions
In addition to State Unemployment (UI) taxes, employers pay Federal Unemployment Taxes (FUTA) on the first $7,000 of wages paid to each employee. However, many state unemployment insurance funds had to borrow from the federal government during the recent economic downturn. When such loans remain unpaid for over two years, a FUTA surtax is activated, increasing employers’ FUTA tax liability.
As of November 10, 2016, the states below had outstanding UI federal loans.
As a result, employers in these states will pay extra FUTA taxes that are effective retroactively to January 1, 2016. These Credit Reduction taxes are due with IRS Form 940 in January 2017, based on the wages paid in 2016.
Credit Maximum additional amount State Reduction due per employee California 1.8% $126.00 Virgin Islands 1.8% $126.00
The additional amount due will be calculated with your last payroll of the quarter, and it will be impounded by PayServ with your payroll taxes for that payroll.
This additional money is due to the IRS with your quarterly return. If you have any questions please feel free to contact your payroll service representative at any time. We at PayServ wish you all a happy, healthy, and prosperous New Year.