Most employers nationwide will receive an employment tax reduction July 1, 2011 when the temporary FUTA surtax expires. The temporary surtax was enacted in 1976. The standard FUTA tax rate will decrease from 6.2% to 6.0%.
Standard Credit Rate is 5.4% for 2011
Generally, employers who pay their state unemployment tax by the due date for filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return receive a credit 5.4% against their Federal Unemployment Tax Act (FUTA) tax. This credit is claimed on Form 940. Therefore, for 2011, many employers will pay an effective rate of 0.8% for wages paid from January 1, 2011 to June 30, 2011 and 0.6% for wages paid from July 1, 2011 to December 31, 2011.
FUTA Wage Base is $7,000 for 2011
The FUTA wage base for 2011 is $7,000. Since many employees have already been paid $7,000 in wages during 2011, no reduced tax will apply for those employees.
Credit Reduction Will Apply in Some States
Unless Congress changes the law, as many as thirty-eight states could be credit reduction states in 2011. Michigan would have a credit reduction of 0.9%, Indiana and South Carolina would have credit reductions of 0.6%, and all other states would have credit reductions of 0.3%. If these states are determined to be credit reduction states in November, the effective rates for the second half of 2011 would be 1.5% for Michigan employers, 1.2% for Indiana and South Carolina employers, and 0.9% for all other credit reduction state employers.
Vision Payroll Will Calculate the Appreciate FUTA Tax for All Employers
Employers in every state can contact Vision Payroll for assistance in determining their FUTA tax rate for 2011 and for assistance in filing Form 940.