FUTA (Federal Unemployment Tax) rate reduced to .6% as of 7/1/2011

by admin 1. July 2011 06:02

Beginning July 1, 2011, the FUTA tax rate will decrease to 6.0%. This change will reduce the effective tax rate for most employers payroll calculation from .8% to .6%. 

Federal Unemployment Tax    

The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a Federal and a state unemployment tax. Only the employer pays FUTA tax; it is not deducted from the employee's wages. (For more information, refer to the Instructions for Form 940 )

 FUTA Calulations:

The FUTA tax rate was 6.2% of taxable wages before. The 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, will receive an offset credit of up to 5.4% regardless of the rate of tax they pay the state.  

Before July 1, 2011

For most employers, the net FUTA tax rate is generally 0.8% (6.2% – 5.4%), for a maximum FUTA tax of $56.00 per employee, per year (.008 X $7,000. = $56.00).

After July 1, 2011 

For most employers, the net FUTA tax rate is generally 0.8% (6.0% – 5.4%), for a maximum FUTA tax of $42.00 per employee, per year (.006 X $7,000. = $42.00).

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