Employers are required to pay an annual federal unemployment tax (FUTA) to the Internal Revenue Service. The FUTA tax covers the administrative costs of the Unemployment Insurance program, pays for the federal share of Extended Benefits and provides loans to states with insolvent trust funds.

The FUTA tax on employers is currently 6.0 percent. However, the federal government provides employers with FUTA tax credits that can reduce this percentage significantly.

As you may know, Rhode Island is one of 30 credit reduction states that borrowed from the federal government in recent years in order to continue to pay Unemployment Insurance (UI) benefits to eligible claimants. Prior to this borrowing, the FUTA tax credit available to Rhode Island employers was 5.4 percent, thereby reducing the total FUTA taxes due from the full 6.0 percent to 0.6 percent (6.0% tax -5.4% credit = 0.6%). However, because Rhode Island had an outstanding federal loan as of November 2011, the net FUTA tax increased by the 0.3%(Credit Reduction) to 0.9% for calendar year 2011.   In states like Rhode Island that have had an outstanding federal loan for more than three years, the net FUTA tax will increase by another 0.3% to 1.2% for calendar year 2012.   The taxes collected by the additional 0.6% tax will be applied to our outstanding federal UI loan balance. 

The additional FUTA tax is effective for RI employers’ 2012 federal taxable wages and will be due with your federal Form 940 by January 31, 2013.

Additional information is available under the ‘UI Info for Employers’ tab at www.dlt.ri.gov/ui. Click here for Questions and Answers on 2012 Tax Changes.

Questions on these tax changes should be directed to:

Phil D’Ambra, Chief of UI Employer Tax - (401) 574-8785

Sara Palmieri, Manager of Benefit Charge - (401) 462-8596