FUTA Surcharge Expires June 30, Santa Rosa, Business

What's that mean to me you say?

The FUTA tax is strictly an employer-paid tax, there is no impact to your employees. Any impact resulting from this change will be reflected in your company’s FUTA tax liability.
Santa Rosa, Petaluma, Sebastopol, Rohnert Park, Windsor, Healdsburg businesses and businesses in the United States are subject to the July 1st, 2011 reduction in Federal Unemployment Tax Act (FUTA) rate due to the expiration of the 0.2% FUTA surtax. This will decrease the rate from 6.2% to 6.0% on wages paid after June 30, 2011. The annual FUTA taxable wage base of the first $7,000 paid to each employee remains unchanged.

What Should Employers Do?

- Update your payroll system to reflect the FUTA rate reduction.

- Calculate the new rate 6% starting July 1st, 2011.

- Reflect the changes on the annual IRS Form 940 and the Employer’s Annual Federal

- Unemployment Tax Return.

- Check the IRS web site for updated information or view Pub 15

- More information on FUTA and the change.

FUTA

The FUTA tax funds unemployment insurance in all the states. It pays one-half of the cost of extended unemployment benefits, during periods of high unemployment, and provides for a fund from which states may borrow, if necessary, to pay unemployment benefits.The FUTA tax rate is currently 6.2 percent and is made up of two components: a permanent tax rate of 6.0 percent and a temporary surtax of 0.2 percent. The FUTA taxable wage base is the first $7,000 paid in wages to each employee during a calendar year. Employers who pay the state unemployment tax on a timely basis receive an offset credit of up to 5.4 percent.

Extension

The temporary 0.2-percent surtax was most recently extended by the Worker, Homeownership and Business Assistance Act of 2009 (2009 Worker Act) (P.L. 111-92). The 2009 Worker Act extended the surtax through 2010 and the first six months of 2011.President Obama has proposed to make the FUTA surtax permanent. Congress has not acted on the president's proposal nor has Congress taken up legislation to extend the FUTA surtax beyond June 30, 2011.

Form 940

Employers pay FUTA annually by filing Form 940, Employer's Annual Federal Unemployment Tax Return. In the Instructions for Form 940, the IRS notes that the FUTA tax rate is scheduled to decrease from 6.2 percent to 6.0 percent beginning July 1, 2011.

I hope this information helps you with the upcoming change. If you have any questions or need assistance contact your CPA or call 707-623-7363 if your a business in Santa Rosa and we can help.

~ Tiffanie Kowalski ~