Indiana Is a Credit Reduction State for 2010
Standard Credit Rate is 5.4% for 2010
Generally, employers who pay their state unemployment tax by the due date for filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return receive a credit 5.4% against their Federal Unemployment Tax Act (FUTA) tax. This credit is claimed on Form 940.
FUTA Wage Base is $7,000 for 2010
Since the FUTA wage base is $7,000 for 2010, a maximum tax of $56 per employee is due, calculated as follows:
| FUTA Taxable Wage Base | |
|---|---|
| FUTA Taxable Wage Base | $7,000 |
| FUTA Tax Rate | 6.2% |
| Maximum FUTA Tax per Employee Before Credit $434.00 | $434 |
| Less: FUTA Tax Credit Reduction ($7,000 X 5.4%) | $378 |
| Maximum Net FUTA Tax per Employee | $56 |
Employers in Certain States Are Subject To Credit Reduction
Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years. The credit reduction is calculated on Schedule A of Form 940.
Indiana Is Subject To Credit Reduction for First Time
Since Indiana was not a credit reduction state in 2009, the credit reduction rate will be 0.3% for 2010. Adding the credit reduction rate of 0.3% to the normal rate of 0.8% results in an effective FUTA rate of 1.1% for Indiana employers in 2010. The credit reduction will continue to increase by 0.3 percentage points each year until the loan is paid, e.g., 0.6% in 2011, 0.9% in 2012, etc. Adding the credit reduction rate of 0.3% to the normal rate of 0.8% results in an effective FUTA rate of 1.1% for Indiana employers in 2010.
Vision Payroll Will Calculate the Credit Reduction for All Indiana Clients
Contact Vision Payroll if you have any further questions on the Indiana credit reduction.
Vision Payroll