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What are the Credit Reduction States for 2024 in Form 940?
Credit Reduction State:
Credit Reduction States are those states that have borrowed funds from the federal government to cover their unemployment insurance programs but have not repaid the borrowed amount within the specified time frame. When a state fails to repay these federal loans on time, it is classified as a credit reduction state.
Employees in these states are subject to additional Federal Unemployment Tax Act (FUTA) obligations. This additional tax is imposed to help repay the outstanding federal loans that the state has not yet settled.
Check out the credit reduction rates for 2024 in the table below:
| States | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|
| California (CA) | - | 0.3% | 0.6% | 0.9% |
| Connecticut (CT) | - | 0.3% | - | - |
| Illinois (IL) | - | 0.3% | - | - |
| New York (NY) | - | 0.3% | 0.6% | 0.9% |
| U.S. Virgin Islands (VI) | 3.3% | 3.6% | 3.9% | 4.2% |
To indicate this credit reduction, you should check the appropriate box on line 2 of Form 940 and complete
940 Schedule A.
If you are a multi-state employer or paid wages to employees in any of the credit reduction states listed above, click here to learn about your additional requirements along with IRS Form 940.
When to file Form 940?
Form 940, the Federal Unemployment Return must be filed annually. The deadline to file Form 940 with the IRS for the 2024 tax year is January 31, 2025.
However, you must deposit the FUTA tax to the IRS if certain tax liability criteria are met. Click here to learn more about the 940 deposit due dates.
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