I never thought I would write a post on FUTA (Federal Unemployment) taxes, but here I go. The original FUTA tax rate was 6% with an up to 5.4% credit for taxes paid to your state. Starting in 1976, Congress had tacked on a surtax of .2% for a gross FUTA rate of 6.2%. This surtax had always been extended until now. Effective July 1, 2011, the FUTA rate drops back to the old 6% rate.
This means that farmers will need to keep track of the wages paid before July 1 and after July 1 since the rate of tax will be different. Also, form 940 will need to be revised for these different rates. In the long-run, this is a reduction in tax, however, for 2011, more paperwork will be involved.
Remember, for farmers, you are required to pay FUTA tax if you meet one of the following two rules:
- You paid cash wages of $20,000 or more in any one quarter during this year or the previous year, or
- You employed as least 10 workers at least one day for any 20 weeks during this year or the previous year.
If either of these two apply, then you must pay FUTA tax.