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2017 FUTA Credit Reduction – How much will you owe?

The U.S. Department of Labor released the listing of FUTA Credit Reduction States for 2017. The standard FUTA rate is 6.0 percent on the first $7,000.00 of wages. Employers in most states will receive a credit of 5.4 percent against the rate, resulting in net tax rate of 0.6 percent; however, California and the Virgin Islands had loans with the Federal Unemployment Trust Fund that were still outstanding. As a result, these states will have their FUTA credit amount reduced for 2017 filing as a way to recover the funds still owed to repay these loans.

Employers in the following states and jurisdictions will have their credit reduced from 5.4 percent to 3.3 percent for 2017 making the FUTA tax rate 2.7 percent:

  • California
  • Virgin Islands

The FUTA credit reduction only applies to employers who pay SUI wages to California and the Virgin Islands All other employers will receive the full FUTA credit of 5.4 percent.

The following is a summary of all states with a 2017 credit reduction and their net FUTA rate:

State              Credit Reduction Percentage             Maximum Tax Increase Per Employee             2017 Net FUTA Rate
California                    2.1%                                                               $147.00                                                           2.7%
Virgin                           2.1%                                                               $147.00                                                           2.7%
Islands

For example, clients with a weekly frequency will have the amount they owe divided by three. Clients that are bi-weekly and semi-monthly will have the amount they owe divided by two. The client letters indicate the incremental billing, if applicable. This process will reduce client burden. Please contact Quality Assurance with requests for additional installment payment options.

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