While everyone is on vacation this summer the IRS has made some changes that may affect your business. With the beginning of the new quarter came two big changes; an increase in the standard mileage rate and a deduction of the FUTA Surcharge.

• The optional standard mileage rates increased to 55.5 cents a mile for all business miles driven July 1 through Dec. 31. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011.

• Employers have been required to pay a flat rate of 6.2% on the first $7000 of each employees annual wages for FUTA. The 6.2% FUTA rate included a “temporary” 0.2% surcharge that was first added in the 1970s. Effective July 1, 2011 the FUTA rate will be reduced from 6.2% to 6.0%. Employers will still receive the 5.4% credit for paying state unemployment on time, reducing the FUTA rate to 0.6% on wages paid up to the annual FUTA limit of $7000.

• However, due to the economic climate in Michigan, Michigan has over borrowed from the Federal Government’s Unemployment funds. Therefore Michigan employers are required to pay an additional 0.6% to help repay these loans and interest. Currently, Michigan employers are paying 1.4% on the first $7000 of an employee’s annual wages. This will fall to 1.2% with the new reduction in FUTA surcharge.

• It is scheduled to increase another 0.3% by the end of the year, leaving Michigan employers paying 1.5%. Look for a catch up payment at the end of the year to comply with this increase.

As always AFS Taxsavers will keep you posted as to all the current changes.