2011 FUTA Credit Reduction
The Department of Labor (DOL) identified several states that had not repaid money they borrowed from the federal government to pay unemployment benefits. These states are considered “credit reduction” states. As a result employers paying wages that are subject to the unemployment tax laws of a credit reduction state were required to pay additional FUTA tax for 2011. The attached Microsoft Excel file contains a list of "credit reduction" states and the corresponding rate reduction percentages. Additional information regarding this topic, including an example on how to calculate the credit reduction, is included on both the Schedule A (Form 940) and the Instructions for Form 940 (PDF).
For more information regarding this topic please reference the following article located on the IRS website - http://www.irs.gov/businesses/small/article/0,,id=250782,00.html