FUTA Tax Bill Spikes for Employers in 20 States
Posted: December 16, 2011
Beginning Jan. 31, employers in 20 states (plus the Virgin Islands) must deposit higher-than-usual Federal Unemployment Tax Act (FUTA) taxes with their Form 940, Employer's Annual Federal Unemployment (FUTA) tax return.
As a result of the high, and long-lasting, jobless rate, many states' unemployment coffers have run dry. To continue paying benefits to those who are out of work, many states took on federal loans. States that were unable to make the two-year repayment deadline, Nov. 10, 2011, became what is known as "credit reduction states." The associated, additional FUTA tax escalates annually, generally at 0.3%, until states repay their loans.
Employers should note that the FUTA tax rate dropped by 0.2% last July 1. It is now 0.6% of wages paid, up to the $7,000 taxable wage base. The FUTA rate reduction partially offset 2011 FUTA credit reduction assessments, but complicated the Form 940 somewhat by assessing different tax rates on wages paid through June, and wages paid from July 1 through Dec. 31, 2011.
Want to know more? Read the full article by Kerry Isberg at HR Morning