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From the third year onward, there may be additional reduction(s) in the FUTA tax credit (commonly dubbed "add-ons").
For example, for taxable years 20, Virgin Islands had a "2.7 add-on" when its tax rate on total wages was below a national minimum.
Once the worker's earnings reach ,000 during a given year, the employer no longer pays any FUTA for that year with respect to that worker.
Certain credits are allowed with respect to state unemployment taxes paid that may reduce the effective FUTA rate to 0.8%.
In addition, FUTA pays one-half of the cost of extended unemployment benefits (during periods of high unemployment) and provides for a fund from which states may borrow, if necessary, to pay benefits.
When a state has an outstanding loan balance on January 1 for two consecutive years, and the full amount of the loan is not repaid by November 10 of the second year, the FUTA credit will be reduced until the loan is repaid.
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