I apologize for the lateness of this post. Quarter end taxes and forms come first though. The IRS has finally reduced the FUTA rate. Not to complicate matters, but the rate changes mid year. From July 1, 2011, the Federal Unemployment rate (FUTA) will change from 6.2% to 6.0%. Most companies are eligible for a 5.4% credit, which reduces your effective FUTA rate from 0.8% to 0.6%. However, some states may have a credit reduction if their state unemployment system (SUTA) has not paid back their loan from FUTA. All of your FUTA liability gets reconciled when you file Form 940 at the end of the year.
WHAT THIS MEANS: All gross pay for the first six months will be calculated at the .8% rate. This is more for IRS audit purpose. All gross pay in the last six months that is still liable for FUTA, will be at the .6% rate. When the 940 form is filed at the end of the year, it will be figured at the .6% rate plus any state credit reduction that may apply. Any over payments will be refunded at that time by the IRS.
If you need help in understanding this law change and how it will effect your business now and at the end of the year, please call us at 765-288-7243, or via our website www.tpspayroll.com and click the contact tab.
