Most businesses do not realize that the amount they pay in Federal Unemployment Taxes (FUTA) for their employees each year is tied to credit allowed for state unemployment taxes paid. This credit is contingent on each state being current on certain federal loans. Unfortunately, once a state defaults on these loans the amount of the credit begins to reduce. Georgia is one of 20 states that have defaulted on their federal loans and are subject to the reduced credit.
This means that each Georgia business will pay up to $21 more per employee for 2011 FUTA taxes. The amount is due with the annual FUTA return which needs to be filed by January 31, 2012. If we remain in default this amount will increase to $42 per employee for 2012.
These are the other states effected by the credit reduction this year:
- Indiana ($42 maximum per employee)
- Michigan ($63 maximum per employee)
- North Carolina
- New Jersey
- New York
- Rhode Island
For more information on the credit reduction you may refer to the 2011 Instructions for Form 940 by clicking here.
If you have any questions regarding your FUTA tax liability or the credit reduction please do not hesitate to contact us.