The FUTA tax rate is scheduled to decrease to 6.0% July 1, 2011. Prior to July 1, 2011 the FUTA tax rate is 6.2%. The tax applies to the first $7,000 you pay to each employee as wages during the year. The $7,000 is the federal wage base. Your state wage base may be different.
This rate change is NOT retroactive to January 1, 2011 but picks up on any tax amounts to be paid after July 1, 2011
Michael Young of ConnectPay reminds employers that this is an employer tax and is not withheld from the employees. Michael further stated that the IRS reports an employer can “generally take a credit against their FUTA tax for amounts they paid into state unemployment funds. The credit may be as much as 5.4% of FUTA taxable wages. If you are entitled to the maximum 5.4% credit, the FUTA tax rate after credit is 0.8% (0.6% after June 30, 2011). You are entitled to the maximum credit if you paid your state unemployment taxes in full, on time, and on all the same wages as are subject to FUTA tax, and as long as the state is not determined to be a credit reduction state.”
In some states, the wages subject to state unemployment tax are the same as the wages subject to FUTA tax. However, certain states exempt some types of wages from state unemployment tax, even though they are subject to FUTA tax (for example, wages paid to corporate officers, certain payments of sick pay by unions, and certain fringe benefits). In such a case, you may be required to deposit more than 0.8% (.06% after June 30, 2011) FUTA tax on those wages.
For complete information on how or if your state unemployment taxes might impact your FUTA tax rate, Paul Altavena of ConnectPay recommends seeing the Instructions for Form 940, for further guidance or speaking to your company tax advisor or CPA.
Paul and Mike state that clients of ConnectPay, LLC enjoy the benefits of ConnectPay’s full tax filing service at no additional charge. "ConnectPay will not only monitor and keep track of tax agency changes, but adopts the necessary changes in its processing and tax service as changes take place. For ConnectPay clients, payroll is reduced to simply reporting the hours via a secure web link, phone, fax or email. ConnectPay does all the rest."
For more information on how ConnectPay can provide this and other services to your company call the Massachusetts office at 978-341-0800 or the Michigan Office at 313-331-4595.
