Beginning July 1, the 0.2% federal unemployment tax (FUTA) surtax is no longer in effect. 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 FUTA tax rate, before consideration of state unemployment tax credits, is 6.0%, effective with wages paid beginning July 1, 2011. Most employers are allowed to claim 5.4% in state unemployment tax credits against the FUTA tax rate, making the net FUTA rate 0.6% beginning with wages paid on July 1.
The elimination of the surtax means that Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, will need to be revised unless legislation is enacted to retroactively reinstate the surtax. On the July 14 payroll industry conference call, Sherry Saucerman, IRS Tax Analyst, said that the IRS hopes to have a draft version of 2011 Form 940 on the IRS website soon. In a previous payroll industry conference call, Anita Bartels, IRS Program Manager in Employment Tax Compliance Policy, said that the revision to Form 940 would probably be handled in a similar fashion to the way that Form 941 for the 2011 tax year was revised to reflect the reduction in the employee Social Security tax rate from 6.2% to 4.2%. That is, an additional line would be added to Form 940 to compute the tax on FUTA taxable wages earned from July 1 to December 31 that takes into account the elimination of the surtax. Another line on the form would be used to compute the tax on FUTA taxable wages earned from January 1 to June 30.
2011 Form 940 must be filed in January 2012.