What Are 940 Taxes for?
An employer pays a number of taxes, one of which is the Federal Unemployment Tax Act (FUTA) tax. Unlike with FICA taxes (Medicare and Social Security), only the employer is required to pay the FUTA tax, which goes towards unemployment compensation for employees who have lost their jobs. FUTA tax is reported on a Form 940.
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Household Employees
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If your employees fall under the category of household employees (such as maids or babysitters), you do not make FUTA deposits via a Form 940, but instead annually, by reporting it on your individual income tax return.
Tax Rate
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The FUTA tax rate is 6.2 percent of the first $7000 of an employee's wages; however an employer can receive a credit up to 5.4 percent if you have an experience rate lower than 5.4 percent.
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FUTA Tax Amount
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If your FUTA tax is more than $500 per year, you must deposit FUTA tax quarterly, in the quarter the tax reached $500.
When to File
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You may be required to file FUTA taxes prior to April 15. Contact the IRS for details or review the website for this year's deadlines for FUTA.
Where to File
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You can file your Form 940 with an authorized financial institution or online via EFTPS (Electronic Federal Tax Payment System).
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