(Photo credit: Arvind Balaraman)

The Federal Unemployment Tax Act authorizes the IRS to collect a federal employer tax used to fund state work force agencies. FUTA taxes for calendar year 2011 will be calculated using two rates. What are they?

 

 

 

A) 4.2% of taxable wages paid through June 30, 2011; and 4% of taxable wages paid after June 30, 2011

B) 5.2% of taxable wages paid through June 30, 2011; and 5% of taxable wages paid after June 30, 2011

C) 6.2% of taxable wages paid through June 30, 2011; and 6% of taxable wages paid after June 30, 2011

D) 7.2% of taxable wages paid through June 30, 2011; and 4% of taxable wages paid after June 30, 2011

A) 4.2% of taxable wages paid through June 30, 2011; and 4% of taxable wages paid after June 30, 2011

Incorrect. Try again!

B) 5.2% of taxable wages paid through June 30, 2011; and 5% of taxable wages paid after June 30, 2011

Incorrect. Try again!

C) 6.2% of taxable wages paid through June 30, 2011; and 6% of taxable wages paid after June 30, 2011

Correct.

According to the Labor Department, since the 0.2% FUTA surtax expired on June 30, 2011, FUTA taxes for calendar year 2011 will be calculated using two rates: 6.2% of taxable wages paid through June 30, 2011; and 6.0% of taxable wages paid after June 30, 2011. The taxable wage base is the first $7,000 paid in wages to each employee during a calendar year. Employers who pay the state unemployment tax on a timely basis will receive an offset credit of up to 5.4%, regardless of the rate of tax paid to the state. Therefore, the net FUTA tax rate for wages paid through June 30, 2011 is generally 0.8% (6.2% – 5.4%), for a maximum FUTA tax of $56.00 per employee, per year (.008 X $7,000. = $56.00). The net FUTA tax rate for taxable wages paid after June 30, 2011 is generally 0.6% (6.0% – 5.4%), for a maximum FUTA tax of $42.00 per employee, per year (.006 X $7,000. = $42.00). Information regarding the change in FUTA rates can be found at the IRS website using this link http://www.irs.gov/businesses/small/article/0,,id=242752,00.html.

State law determines individual state unemployment insurance tax rates. For a table of current tax rates and taxable wage base information for individual states, click here http://www.unemploymentinsurance.doleta.gov/unemploy/statelaws.asp and select Significant Provisions of State UI Laws.

D) 7.2% of taxable wages paid through June 30, 2011; and 4% of taxable wages paid after June 30, 2011

Incorrect. Try again!