FUTA Tax Notes for 2011 Payroll Wages

The Federal Government failed to extend the current FUTA rate of 0.8% which expired July 1, 2011 and therefore the rate has dropped to 0.6% for all wages paid on or after July 1st 2011. Based on our research of this topic, there still seems to be some uncertainty of the final outcome of this ruling before the 2011 calendar year is up, and therefore the Federal Government could still revert back to the original 0.8% rate before the year is out.

Our recommendation is that you leave your rate in the Payroll Properties set to 0.8% as it always has been for the remainder of the 2011 calendar year. This will mean that the employer burden will accrue at a slightly higher rate than you will be paying, should the lower rate remain in effect.

WARNING – FUTA Tax is a year-to-date calculated rate in the AccuBuild System, so if you change the rate to 0.6% it will adjust all prior calculated FUTA tax amounts to 0.6% for the calendar year which you do NOT want. If you have changed the rate to 0.6% and already processed a payroll, just change it back to 0.8% and let the system adjust again during the next payroll posting process.

•Actual FUTA – This is the actual tax amount that is due based on a tax rate of 0.8% thru June 30, 2011, and a tax rate of 0.6% for wages paid on and after July 1, 2011. This is the actual tax due based on the NEW tax rate and should be used to make any FUTA Tax Deposits.

•Over/(Under) – This amount will be the difference between what has been accrued as an expense and what is actually due. If you leave the FUTA Rate at 0.8% as instructed above, you should end up with an over accrual amount.  At the end of the calendar year for 2011, if the new rate is still in effect, you can make a journal entry to clear out the over accrued amount and offset it to your payroll burden expense account.