Does the credit reduction on Form 940 apply to every employer? A new client told me his former accountant has not put the credit reduction on his Form 940 last year (2012). But he has not received a letter for it. The amount is not much though (about $50). Is it because the amount is too small so the IRS decided not to go after him? Or the credit reduction does not apply to everyone and possibly not to his particular situation?
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Last edited by RightOn; 01-21-2014, 02:58 PM. -
See Link
I have posted the link for you that explains it.
For 2013 These are the states impacted
Reduction
Arkansas 0.9%
California 0.9%
Connecticut 0.9%
Delaware 0.6%
Georgia 0.9%
Indiana 1.2%
Kentucky 0.9%
Missouri 0.9%
New York 0.9%
North Carolina 0.9%
Ohio 0.9%
Rhode Island 0.9%
Virgin Islands 1.2%
Wisconsin 0.9%Last edited by ATSMAN; 01-21-2014, 03:47 PM.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR -
Thank you. He is in California. So, according to the instruction, there is a 0.9% credit reduction rate. Therefore, it still did not answer my question why the client could get away from it last year.Originally posted by ATSMAN View Post
What I really want to find out is if there are any situations that an employer (who is in a credit reduction state) is exempted from the credit reduction. The IRS page does not mention any exempted situations. So I guess the answer is no. Just want to make sure though.Last edited by RightOn; 01-21-2014, 05:26 PM.Comment
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If the previous accountant missed the credit reduction (it actually increases tax) and there is a $50 outstanding it may be just a matter of time before the taxpayer gets a deficiency notice. Or if he is lucky it may vanish in thin air!
I have a client that has a 52 cents deficiency on his state unemployment tax (we are required to file electronically in MA). I tell him to add that to the 4th qtr payment but he wants to see how long before they catch him, just to see. The deficiency started in 2012 I believe.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDRComment
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Credit Reduction
If you don't figure in the credit reduction, IRS will pick it up later. What the money is used for is to repay the federal government for loans to that particular state to cover the cost of long term unemployment benefit payments.Comment
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Thank you for the replies.
I started this thread because, after talking to this new client, I was wondering if there are any exempted situations that I am not aware of. After reading the IRS instruction and the replies in this thread, I think I can now safely conclude that there is no exception and the credit reduction applies to everyone. Thank you all.Comment
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