Effective July 1, 2011, the 0.2% federal unemployment tax (FUTA) surtax is no longer in effect after House Republicans refused to extend the 35-year old “temporary” unemployment surtax. The surtax was part of the 6.2% gross unemployment tax rate that employers pay on the first $7,000 of wages paid annually to each employee (6% permanent tax rate + 0.2% temporary surtax). The surtax had been in effect in every year since 1976, when it was enacted by Congress on a temporary basis. The FUTA tax rate, before consideration of state unemployment tax credits, is 6.0%,effective July 1, 2011.
Employers need to separately track FUTA taxable wages paid before July 1 and FUTA taxable wages paid after June 30 since the FUTA tax rates are different during those two periods.
The big question will be on whether Congress will introduce legislation to retroactively reinstate this 35 year-old temporary surtax. The surtax had been extended eight times since its enactment in 1976.