The ‘temporary’ (since 1976) federal unemployment tax (FUTA) surtax expired on June 30, 2011. This surtax was 0.2% on top of the permanent 6% tax for the first $7,000 of gross wages paid annually to each employee. Here’s what you need to do with regard to the change that took effect July 1:
– If you haven’t already, begin paying only 6% unemployment tax (before consideration of state unemployment tax credits) on the first $7,000 of an employee’s wages.
– Separately track the FUTA taxable wages paid prior to July 1 and those paid after June 30, 2011.
– If your organization’s FUTA tax is more than $500 for the year and you make quarterly payments, the amount due on August 1 will be based on wages paid through June 30, so the 6.2% rate will apply. For the payment due on October 31, the amount due will be at the 6% rate.
– Be aware that there is a possibility that Congress will retroactively reinstate the surtax. If that happens, the IRS has stated that employers won’t be assessed penalties for the difference in the 6% and 6.2% deposits.
A revised Form 940, the Employer’s Annual Federal Unemployment (FUTA) Tax Return, is in process to reflect elimination of the 0.2% surtax. The return will be due in January 2012.