Beginning July 1 2011, the 0.2% federal unemployment tax (FUTA) surtax is no longer in effect. Thus, the FUTA tax rate, before consideration of state unemployment tax credits, is now 6.0%.
Under Code Sec. 3301(1), the 0.2% FUTA surtax expired on June 30, 2011. The surtax was part of the 6.2% gross unemployment tax rate that employers paid on the first $7,000 of wages paid annually to each employee (6% permanent tax rate, 0.2% temporary surtax). The surtax has been in effect in every year since 1976, when it was enacted by Congress on a temporary basis. Since legislation has not been enacted to extend the surtax, the FUTA tax rate now drops to 6.0%, effective July 1, 2011.
The IRS noted on a payroll industry conference call that employers need to separately track FUTA taxable wages paid before July 1 2011, and FUTA taxable wages paid after June 30, 2011 since the FUTA tax rates are different for the two periods. Employers should note that the next quarterly payment is due on July 31, 2011, but that payment is based on taxable wages earned through June 30, 2011 so it will be computed using the 6.2% FUTA tax rate. However, if legislation is not enacted to retroactively reinstate the FUTA surtax beginning July 1, 2011, based on the current law, all payments made after that will be computed using the 6.0% FUTA tax rate.
The IRS is working on revising Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, to take into account the elimination of the surtax.