Congress has announced that the 0.2% FUTA surcharge will not be extended before June 30, 2011. Employers have been required to pay a flat rate of 6.2% on the first $7,000.00 of each employee’s annual wages for FUTA. The 6.2% FUTA rate included a temporary 0.2% surcharge that was first added in the 1970’s. The FUTA rate will be reduced from 6.2% to 6.0% effective July 1, 2011. Employers will still receive the 5.4% credit for paying state unemployment on time, reducing the FUTA rate to .6% on wages paid up to the annual FUTA limit of $7,000.00.
The IRS is currently revising Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return) to accommodate the two different FUTA rates for calendar year 2011.
Payroll departments and outsourced payroll services should begin to calculate the 0.6% rate effective July 1, 2011. We will continue to monitor this issue closely and publish additional information as necessary.
To read more about this change, view Section 14 in the IRS Employer’s Tax Guide. (opens in new window)
Src: Paycor
