Employers must use Form 940 Schedule A if they pay state unemployment tax in more than one state or if their wages in any state are subject to credit reduction. This form is a crucial attachment to Form 940 when filing.
Multi-state employers are those who pay unemployment taxes in multiple states because they hire employees from various locations. On line 1b of Form 940, check the box to identify yourself as a multi-state employer.
To provide unemployment benefits, states need sufficient funds. If a state lacks funds, it borrows from the federal government. States must repay these loans within a specified period, or they risk losing their credit. Employers in these states face a reduction in their FUTA tax credit. The Department of Labor identifies states with credit reductions. Employers in these states must pay additional federal unemployment tax when filing Form 940.
Below are the credit reduction rates for 2022 and 2023:
State | 2022 Rate | 2023 Rate |
---|---|---|
California | 0.3% | 0.6% |
Connecticut | 0.3% | - |
Illinois | 0.3% | - |
New York | 0.3% | 0.6% |
U.S. Virgin Islands | 3.6% | 3.9% |
The following table provides the two-letter postal abbreviations used on Schedule A:
State | Abbreviation | State | Abbreviation |
---|---|---|---|
Alabama | AL | Montana | MT |
Alaska | Ak | Nebraska | NE |
Arizona | AZ | Nevada | NV |
Arkansas | AR | New Hampshire | NH |
California | CA | New Jersey | NJ |
Colorado | CO | New Mexico | NM |
Connecticut | CT | New York | NY |
Delaware | DE | North Carolina | NC |
District of Columbia | DC | North Dakota | ND |
Florida | FL | Ohio | OH |
Georgia | GA | Oklahoma | OK |
Hawaii | HI | Oregon | OR |
Idaho | ID | Pennsylvania | PA |
Illinois | IL | Rhode Island | RI |
Indiana | IN | South Carolina | SC |
Iowa | IA | South Dakota | SD |
Kansas | KS | Tennessee | TN |
Kentucky | KY | Texas | TX |
Louisiana | LA | Utah | UT |
Maine | ME | Vermont | VT |
Maryland | MD | Virginia | VA |
Massachusetts | MA | Washington | WA |
Michigan | MI | West Virginia | WV |
Minnesota | MN | Wisconsin | WI |
Mississippi | MS | Wyoming | WY |
Missouri | MO | Puerto Rico | PR |
U.S. Virgin Islands | VI |
Ensure you follow these steps to correctly complete Form 940 Schedule A. Proper compliance helps avoid penalties and ensures accurate tax reporting.