New FUTA Tax Rate for 2011

The Federal Unemployment Tax (FUTA) Act surcharge of 0.2% was expired on June 30, 2011. This means that the FUTA rate for employers decreased from 6.2% to 6.0% starting on July 1, 2011.

The IRS is currently working to revise Form 940, Employer’s Annual Federal Unemployment Tax Return, to accommodate the two different rates and the form will be available before the Jan. 31, 2012, due date.

The law was passed in 1976, and Congress has extended it several times since. Unemployment benefits are not tied to the surcharge, so the expiration of the surcharge will not affect current or future unemployment benefits.

For 2012, the effective tax rate would be 6.0% – 5.4% (maximum credit) = 0.6%.  0.6%*$7,000 = $42 per employee per year.  On your 2012 940 tax return, make sure to use the 6.0% rate instead of the 8% rate.

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