During COVID, the state of California took a loan from the Federal Government to be able to pay all of the unemployment benefit claims. Now, all the employers in the state need to pay the loan back to the tune of $42 per employee for each employee who earned $7,000 during 2023. This is called a “FUTA Credit Reduction Surcharge” and it must be paid by year end.
Through our experience with working with several different payroll companies, it looks like each payroll company will be handling the surcharge differently. Some payroll companies have been adding the surcharge on a per payroll period basis during the year. Some payroll companies will add the $42 per 2023 employee on the first payroll in December. And some payroll companies will add the $42 per 2023 employee on the last payroll in December. If you have not been charged a FUTA Credit Reduction Surcharge on a per payroll basis during the year, you can expect to have it come out in a lump sum during the month of December. Please be sure to plan for this unexpected additional payroll expense in December.
If you do not use a payroll company, you will need to pay the additional FUTA surcharge when you file and pay for your December payroll taxes. If you have employees that did not earn a minimum of $7,000 then multiply their earnings by .006 to determine how much is owed for each employee