What will happen to the FUTA surtax

Since 1976 there has been a 0.2% FUTA surtax.  Currently, the gross federal unemployment tax rate that employers pay on the first $7,000 of wages paid to each employee is 6.2%, which is made up of the 6% permanent tax and 0.2% temporary surtax. 

The 0.2% temporary surtax is currently set to expire on June 30, 2011.

 We do not know if Congress will take action to extend the surtax beyond June 30, 2011.  It is possible that sometime after the fourth quarter 2011, Congress could retroactively reinstate the surtax effective July 1, 2011. 

If this happens, and employers compute their 3rd and 4th quarter payroll unemployment tax deposits without the temporary surtax, the IRS has indicated that they will not penalize employers for any deposit underpayments. 

At this time, Congress has yet to address the surtax extension, but its’ continuation is included in the President’s fiscal year 2012 budget proposal.