A recent audit was performed to determine if the IRS FUTA Certification Program ensures the accuracy of FUTA credit claims. During the audit, it was revealed that 94 percent of State Agencies submitted reports with formatting errors in key data fields identifying FUTA discrepancy cases. The discrepancies occurred with one state and multi-state employers. In addition, 12,171 employers may have overpaid 2012 FUTA taxes due to a programming error and incorrect FUTA tax Headlightrates used to compute the amount of tax owed.  It is estimated as much as $3.2 million may have been incorrectly assessed.  The process is currently being reviewed by the Commissioner of Small Business/Self Employed Division with three objectives:  to determine how to accurately identify multi-State employer discrepancy cases, to correct tax assessments of the 12, 171 employers with tax errors, and finally, to ensure programming updates to accurately calculate tax adjustments.  (Please contact your tax analyst if you would like a copy of the audit report.)

Another item of interest is the federal review of claimant limits (number of claim weeks and amounts of claims) by the states. During the Great Recession, nine states decreased the number of weeks a claimant can collect for the state to avoid increasing employer tax rates.  President Obama has proposed, in the 2017 Budget Plan, to require all states to provide 26 benefit weeks to eligible claimants.

In some cases, the states reduced the amount a claimant could receive.  This too would be controlled at the federal level, keeping a standard claim amount for all states during an economic downturn.   Another proposal by the President is a permanent, federally-funded program to extend the benefits an additional 52 weeks for states having rapid job losses, or high unemployment.

 

Five states owe money under the Title XII loan provision; California, Connecticut, Ohio, and the Virgin Islands were joined by Kentucky earlier in 2016.   States could repay their debt before the November 10, 2016 deadline, resetting the FUTA tax credit to 5.4 percent. Kentucky must have unpaid debt for two January first calendar dates before affecting the Kentucky FUTA credit reduction. If debts are not satisfied, 2016 FUTA credit reductions could be as follows:

3.16.TaxChart

 

States with Title XII advance balances on January 1, 2016   –  Department of Labor Statistics

 


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