Glossary · Payroll & taxes
FUTA Credit Reduction State
A state that has not repaid federal unemployment-trust-fund loans and whose employers therefore receive a reduced FUTA credit, increasing effective FUTA tax.
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Entravia Editorial
Employers in credit-reduction states pay an effective FUTA rate above 0.6%. The IRS publishes the list annually. PEO clients in credit-reduction states should confirm whether the PEO or the client absorbs the additional cost.
California, Connecticut, New York, and the Virgin Islands have all appeared on recent credit-reduction lists.
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