ADP LLC ADP the ADP logo and ADP A more human resource are registered trademarks of ADP LLC What is FUTA Credit Reduction FUTA credit reduction means employers in specific states meet ID: 849970
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Copyright © 2017 ADP, LLC . ADP , the ADP logo , and ADP A more human resource are registered trademarks of ADP, LLC. What is FUTA Credit Reduction? ï· FUTA credit reduction means employers in specific states meet ing certain criteria , will pay increased FUTA taxes on wages paid during an applicable tax year, due to the IRS with the 940 tax filing form. ï· This is an additional tax being charged by the IRS . It is not a fee controlled or assessed by ADP ® . ï· Background: Employers pay federal a nd state unemployment insurance (UI) taxes on wages paid to employees. The FUTA tax rate is 6%; however, the IRS grants a credit of 5.4% for state UI taxes paid, making the effective FUTA tax rate 0.6%, up to the taxable wage limit of $7,000. When state UI funds are depleted, states borrow funds from a designated federal loan account. If such loans are not repaid within two years, employers lose part of this FUTA credit, increasing the FUTA tax rate for wages paid in the affected states. Who determines the FUTA Credit Reduction states? ï· The U.S. Department of Labor identifies the states subject to the FUTA credit reduction. What are the credit reduction states for the 201 7 tax year and what is the maximum additional tax I should expect? ï· California - $ 147 per employee . Why is ADP not debiting my account and depositing the FUTA Credit Reduction? ï· ADP is responsible for filing your 201 7 940 return. The payment for FUTA credit reduction is required to be remitted in addition to the FUTA tax already debited and deposited by ADP. This additional tax deposit is due to the IRS with your 940 tax filing form (line 11) for the 201 7 tax year. If the deposit is not received by the IRS by the due date of 1/3 1 /1 8 , penalties and interest may be assessed by the I RS. ADP calculated the correct tax throughout the year ; t his is a supplemental assessment determined by the IRS in November 201 7 . It was not o fficially assessed prior to this date . ï· ADP is not authorized to debit your account for taxes once an account has been inactivated from ADP tax filing services. Federal Unemployment Tax Act (FUTA) Questions & Answers