Beginning on July 1st, the 0.2% federal unemployment tax (FUTA) surtax is no longer in effect.  The FUTA rate, before consideration of state unemployment credits, is now 6.0%.

This means that FUTA will need to be calculated separately for the first half of the year and calculated separately for the second half of the year.  Assuming that all state unemployment is paid timely, the FUTA rate on the first $7,000.00 of wages earned from January 1st, 2011 until June 30, 2011 was 0.8%.  The FUTA rate on the first $7,000.00 of wages for new employees and for any of the remaining $7,000.00 on existing employees will be 0.6% for July 1st, 2011 until December 31, 2011.

The IRS is currently working on updating the 2011 Form 940 to report FUTA tax to accommodate this change.  Additionally, if congress decides to retroactively reinstate the surcharge there will be no penalty on deposits for the third and fourth quarters of 2011 for depositing tax calculated at the 0.6% rate.

Please contact our payroll experts if you would like assistance with this calculation or preparation of Form 940.