FUTA Surcharge Expires

The “temporary” 0.2 percent surcharge employers have been paying on their Federal Unemployment Tax Act (FUTA) tax since the 1970s is gone. At least for now.

The FUTA tax of 6.2 percent applies to the first $7,000 of wages for each employee, although the IRS credits employers 5.4 percent if they pay their state unemployment taxes in a timely fashion, reducing the net federal tax rate to 0.8 percent. The “temporary” surcharge that has been in place for decades expired June 30, 2011, bringing the net cost to employers down to 0.6 percent.
A proposal in Pres. Obama’s 2012 budget would make the 0.2 percent surcharge permanent, but at least for now, employers can an enjoy a modest savings.