2025 Federal Unemployment Tax Act (FUTA) Credit Reductions

For 2025, the states of California and New York are required to pay their unemployment loan back to the federal government through an increased FUTA surcharge, to be paid by employers in these states. The rate established by the IRS is 1.2%, to be assessed on the first $7,000 in wages paid to each employee working in California or New York, up to $84 per employee. 

What should an Employer expect?

1. 1. In partnership with Coastal Payroll, this additional tax rate will be effective beginning with payrolls dated 12/1/2025, and all 2025 payrolls processed on or after this date will see this additional tax applied.
   2. Additionally, the first payroll dated on or after 12/1/2025 will include a retroactive collection of this tax, to apply to all wages paid to-date in 2025. This can be a large amount of additional taxes, so please plan accordingly.
   3. To get a rough estimate the amount of the tax to be collected on the first payroll in December, take the maximum per-employee tax amount ($84) and multiply it by the number of employees paid in California and New York this year.

Please refer to the US Department of Labor’s website for additional information. Site: US Department of Labor’s website 

If you have any questions on this topic, please give FLORES a call. Office Phone: 619-588-2411