The FUTA credit reduction is an extra % that is being collected for the Unemployment fund that all CA employers (and those in other states) are having to pay on up to $7k of wages paid per employee they employed this year.
This happens when the state pays out more unemployment funds than it has collected. When the state’s account is depleted the IRS/feds covers the shortfall, and then they tac on this “credit reduction”(which is a fancy way of saying additional tax/fee) every year for employers to pay until the account is built back up again. All employers in the effected states are receiving a notice about this additional tax due on 2022 wages.
This tax should be paid from your business account, the same way your other payroll taxes are paid by 1/15/2023
One response to “What is the FUTA Credit Reduction?”
This was super helpful to learn after I got the notice that I had a new tax that was due. Thanks for letting us know what to expect, Alison!