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Employers Get a Small Break: FUTA Tax Decreases

Beginning July 1, 2011, the Federal Unemployment Tax (FUTA) decreased from 6.2% to 6.0% before credits for state unemployment taxes paid. Congress did not extend the 0.2% FUTA surcharge before the June 30 deadline. 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 1970s.

Employers will still receive the 5.4% credit for paying state unemployment on time, reducing the FUTA rate to 0.6% 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. Wages paid before 7/1/11 are subject to the 6.2% rate, while wages paid after 7/1/11 will be subject to the lower 6.0% rate.

Please contact Kim Haumann at khaumann@BlackmanKallick.com or 312-980-3249 or your Blackman Kallick advisor with any questions.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.