Congressional action is required to extend a 0.2 percent Federal Unemployment Tax Act surtax past its June 30 expiration date, and there is indication that Congress is not expected to extend the surtax. This would reduce the total FUTA tax rate to 6.0 percent for the period 7/1/2011 through 12/31/2011. Applying the full 5.4 percent credit for state unemployment taxes, except employers in a “credit-reduction state”, the net FUTA rate will be .6 percent for the remainder of the year.
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.
The temporary 0.2-percent surtax was most recently extended by the Worker, Homeownership and Business Assistance Act of 2009 (2009 Worker Act) (PubLNo 111-92) through 2010 and the first six months of 2011. President Obama has proposed to make the surtax permanent. Congress, however, has not acted on the president’s proposal nor has it taken up legislation to extend the surtax beyond June 30, 2011.
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