From the Desk of... Rob Kane, Clifton Gunderson Jun 28, 2011

Rob Kane

B: 319-363-2697

E-mail: Rob.Kane@cliftoncpa.com

The Federal Unemployment Tax (FUTA) surtax is scheduled to expire June 30, which means that FUTA taxes will be 0.2 percent lower for employers beginning July 1. Employers would need to update their software for the change and track 2011 FUTA taxable wages separately for January-June and July-December.

So far, it appears that Congress will not extend the surtax, and on July 1 FUTA will revert back to the 6 percent rate from 6.2 percent. (Since employers liable for state unemployment taxes are generally allowed to take a 5.4% credit against the FUTA tax for state unemployment taxes paid, most employers pay a net FUTA tax of 0.8%, or 6.2 percent less 5.4 percent.) Employers that chose to make FUTA deposits using the base rate of 6.2 percent for all 12 months in 2011 might have an overpayment on Form 940, unless Congress extended the surtax.

The IRS would revise Form 940: Employer’s Annual Federal Unemployment Tax Return if Congress allowed the surtax to lapse. If the surtax were retroactively reinstated after the end of the fourth quarter of 2011, the IRS has said that it would not penalize employers who did not take into account the 0.2 percent surtax for the third and fourth quarters of 2011.

IRS posts Form 8955-SSA for reporting deferred vested benefits

The Internal Revenue Service (IRS) has posted on irs.gov the new Form 8955-SSA for reporting information about deferred vested benefits to plan participants. Form 8955-SSA replaces Schedule SSA, previously filed with the Department of Labor Form 5500, and is to be completed by employee benefit plan administrators. It is used by the Social Security Administration to alert retirees filing for benefits that they may have additional benefits available to them under a previous employer’s plan.

Tax service providers were not able to access a new version of the form until June 18, 2011, and they are working quickly to add it to their software. A print version most likely will be used by those administrators and providers who need to meet the August 1 deadline for certain individual employees. The IRS has extended the deadline for 2009 and 2010 8955-SSA data to January 17, 2012.

The revision in IRS forms is being made to comply with Department of Labor (DOL) electronic reporting requirement changes made to Form 5500, for which Schedule SSA had been used. The

changes were implemented for years beginning in 2009; Form 8955-SSA was in the process of being added in place of Schedule SSA since then.

Typically, participants must be reported to the IRS when they separate from service covered by the plan and are entitled to a vested plan benefit which is not paid until a later date. Participants should be reported no later than the plan year following the plan year in which the separation occurred. Form 8955-SSA reporting is not required for a participant who starts receiving vested benefits in the same year as the separation from service.

Rob Kane, CPA is a tax partner with Clifton Gunderson LLP in Cedar Rapids. He can be reached at Rob.Kane@cliftoncpa.com. For additional information, visit cliftoncpa.com.