FUTA Credit Reduction States Released for 2020

At a Glance 

• The US Department of Labor announces 2020 FUTA credit reduction states.
• Virgin Island employers will pay FUTA taxes at a rate higher than employers in other US states and American territories.

FUTA Credit Reduction States 

The US Department of Labor announced that employers the Virgin Islands will pay their FUTA taxes for calendar year 2020 at a higher federal unemployment (FUTA) tax rate than employers in other states because they failed to repay their outstanding federal UI loans by November 10, 2020. 

Below is the final list as published by the US DOL:

State	Credit Reduction	Additional Cost / Employee
Virgin Islands	3.0%	$210.00

 

With the recent increased rate of Unemployment in the wake of the Coronavirus Pandemic, questions remain as to whether additional states will see Credit Reductions in the coming years.  As state trust funds are depleted, some states will be forced to take loans in order to provide required benefits. If the loans are unpaid after a period of 2 years, states become subject to Credit Reductions when loans are not repaid by November 10 of the following year.

Next Steps 

Paylocity will continue to monitor the impacts of the Coronavirus Pandemic on the FUTA taxes in the coming years and provide updates as they become available.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. 

This information is provided as a courtesy, it may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.