The U.S. Department of Labor has reported that employers in the State of New York are subject to a FUTA tax credit reduction of 0.3% of taxable wages for 2004 as provided in section 3302(c) of the Internal Revenue Code.

The Internal Revenue Service refers to a state with reduced FUTA tax credit as a "credit reduction state." Employers in a credit reduction state must file Form 940 Employer's Annual Federal Unemployment (FUTA) Tax Return and may not file Form 940-EZ. Household employers in the State of New York must check a designated box in Part II, Section B of Schedule H (Form 1040) Household Employment Taxes and complete a worksheet in the Instructions for Schedule H (Form 1040).

The effect of a FUTA tax credit reduction for most New York employers will be an increase in total FUTA tax reported on Form 940 or on Schedule H (Form 1040). Form 940 filers who must complete Part III, Record of Quarterly Federal Unemployment Tax Liability, must report this additional tax in the fourth quarter column and include the amount in their fourth quarter tax deposit.

The 2004 version of Form 940 is available for download. Its separate instructions and the Schedule H (Form 1040) Household Employment Taxes and its separate instructions should be available in early December 2004.

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Further information:
www.irs.gov/formspubs/article/0,,id=109875,00.html
www.irs.gov/pub/irs-pdf/f940.pdf