FUTA Decrease is scheduled but will it happen?
On July 1, 2011, the FUTA Tax rate is scheduled to decrease from 6.2% of the first $7000 in wages in a calendar year to 6.0%. If your state is allowed the full SUTA Credit (Michigan, Indiana, and South Carolina were not in 2010 and there are as many as 22 states that may not for 2011) your effective FUTA rate is cut to 0.6% from 0.8%.
What does all this mean? First, the effect in 2011 will be small. Most employers have paid over $7000.00 in wages to any full-time employee that has been employed with them for all of 2011. The employers have already paid the FUTA tax in full before the rate decreases. For any new hires, especially those hired after July 1, the employer will save as much as $14.00 per employee.
For 2012 and beyond, employers are scheduled to save $14.00 per employee that is paid $7000 or more in any calendar year. This, however, requires President Obama and Congress to not change their mind. There have been rumblings about this but I haven’t seen anything come to a vote and time is running short.
The real fear for employers is that if the government chooses to look at it, they may raise the wage limit instead of the rate. If they raise the limit from the current $7000 to $10,000 it will cost employers more than the rate decrease saves them.
We’ll keep our eyes on it and report anything that comes from it.
