Form 940 Schedule A: Multi-State Employer and Credit Reduction Information

How do you add Schedule A (Form 940) information to Form 940?

If you’re a multi-state employer (operating in more than one state), check the box on line 1b in Form 940. Then, fill out Schedule A (Form 940) and attach it to your Form 940.

If there are credit reduction states and If you paid wages subject to the unemployment tax laws of credit reduction states, check the box on line 2 in Form 940 and fill out Schedule A (Form 940).

The total from Schedule A is entered on Form 940, Line 11. The total entered here should match the total credit reduction calculated on 940 Schedule A.

Click here to learn the line-by-line instructions for Form 940.

How to calculate the FUTA tax rate on 940?

To calculate your FUTA tax rate, complete Form 940 Schedule A. It is a worksheet that lists the applicable tax rates in each state. You can find your credit reduction rate on Schedule A of Form 940. Enter your total credit reduction on line 11 of the Form 940.

What are credit reduction states?

States need sufficient funds on hand to pay their unemployment insurance benefits. If a state does not have enough funds to cover the costs, it must borrow from the federal government. If a state doesn’t repay the federal loan after two years, then it might become a credit-reduction state. Employers in these states will not be able to get full credit for their FUTA tax rates.

The Department of Labor determines which states are subject to credit reductions. If an employer pays wages that fall under the unemployment tax laws of a credit reduction state, they are required to pay an additional federal unemployment tax when
filing Form 940.

Click here to find the latest information on credit-reduction states for 2025.