Potential FUTA Credit Reductions in Illinois

Why Illinois Employers Face a FUTA Credit Reduction

If you’ve been following the news, you’ve likely heard that Illinois has outstanding federal unemployment trust fund loans. A FUTA credit reduction occurs when a state with these outstanding loans does not repaid by the required deadline.

These loans must be repaid by November 10, 2022, in order for Illinois employers to avoid paying more in FUTA taxes for tax year 2022. If Illinois does not repay the loans by that deadline, Illinois employers may be subject to an Illinois FUTA credit reduction.

How the FUTA Credit Reduction Impacts Employers

Currently, the Federal Unemployment (FUTA) Tax rate is 6% on the first $7,000 you pay to each employee. Most employers receive a maximum credit of 5.4% which lowers their FUTA rate to 0.6%, or up to $42 per employee per year.

If Illinois does not repay their outstanding loans by November 10^th, Illinois employers face a 0.3% reduction in the 5.4% credit resulting in a FUTA rate of 0.9% on the first $7,000 of pay for each employee, or up to $63 per employee, for 2022.

How to Plan for a Potential FUTA Tax Increase

While we wait to see if Illinois will repay its outstanding federal unemployment debt, we recommend that your business estimate the amount of additional FUTA taxes that will be due for 2022 so you can plan accordingly.

Where to Find More Information on FUTA Credit Reductions

For more information on FUTA credit reductions, please visit:

• FUTA credit reduction, Internal Revenue Service
• FUTA Credit Reduction, Employment & Training Administration, Department of Labor

How Siepert & Co., LLC Can Help

For help determining how much more you may have to pay in FUTA taxes for 2022, reach out to us at Siepert & Co., LLP.