Final 2023 FUTA Credit Reduction States Published

At A Glance

• The US Department of Labor (DOL) has published the final 2023 FUTA credit reduction states. 
• The credit reduction states/territories are California, New York, and the Virgin Islands (USVI).
• You can view the DOL website for more information at: FUTA Credit Reductions, US Dept of Labor.

Final 2023 FUTA Credit Reduction States

Five states faced a potential FUTA credit reduction in 2023: California, Connecticut, Illinois, New York, and the Virgin Islands. Connecticut and Illinois repaid their outstanding advances before November 10, 2023; thus, avoiding a FUTA credit reduction.

California and New York had outstanding advances on January 1 for 2021, 2022, and 2023 and did not repay their advances before November 10, 2023. Therefore, employers in these states face a 0.6% credit reduction.

The US Virgin Islands (USVI) had an outstanding advance on January 1 from 2010 through 2023 and did not repay the advances before November 10, 2023. Therefore, employers in the USVI face a 3.9% credit reduction.

For more on FUTA taxes and how to pay them, visit our What is FUTA Tax? Federal Unemployment Tax Explained resource.

Next Steps

Paylocity will apply this update to all applicable 2023 Forms 940.

To review the full scope of the DOL announcement, visit: FUTA Credit Reductions, US Dept of Labor.

Thank you for choosing Paylocity as your Payroll Tax partner. This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, tax attorney, or tax advisor.