PA employers are learning that their Federal Unemployment Tax (FUTA) for 2011 is greater than they anticipated, even though the FUTA tax rate decreased in July 2011 from .8% to .6%.
This is because PA has an outstanding liability with the federal government for the second consecutive year, and the U. S. Department of Labor has, therefore, determined PA to be a “credit reduction” state. As a result, PA employers will see their FUTA tax liability increase by .3% to .9%. The tax increase is collected in January 2012 with the filing of the annual federal Form 940. “Credit reduction” states will be required to complete and attach Form 940 Schedule A to their Form 940.
In 2012, the initial FUTA tax liability for PA employers will be .9%. However, the rate may increase in November when the U. S. Department of Labor announces the annual list of “credit reduction” states. The FUTA tax rate for PA employers will continue to increase by .3% every year until PA eliminates its outstanding debt to the federal government.
This information was originally provided to PA employers by the PA Department of Labor & Industry in late December. That mailing also indicated that the 2012 PA Unemployment Contribution (UC) rate notices, which were normally mailed on December 31, would be delayed until later in the first quarter of 2012.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.