IRS 940 Form Instructions
Employers fill out an IRS 940 Federal Unemployment Tax Act, or FUTA, form to annually report the funds paid into the unemployment compensation system for workers who lost their jobs. Only the employer pays the tax at both the state and federal level, and he does not collect it from the employees' wages. After you pay the first $7000 to employees, the FUTA tax applies to you during the calendar year once you subtract payment exemptions from the FUTA tax.
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Instructions
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Fill out IRS 940 FUTA tax form. Write in legible handwriting and in black ink. If a statement on the form does not apply to you, leave the line blank and move on to the next question. Complete both pages before sending out the form. Fill in the information in the first left-hand box by writing down your Employee Identification number, or EIN, your name, the trade name of the business -- if applicable -- and the address.
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Place a check mark next to each appropriate item concerning the type of return you are filing in the right-hand box: amended, successor employer, no payments to employees for the tax year or Final -- business closed or stopped paying wages. Move to the next section concerning your return. Answer question 1 and subparts 1a and 1b regarding whether you paid state unemployment tax in one state or in more than one state. If you paid only in one state, write in the state's abbreviation on the space provided. Fill out a Schedule A if you paid the unemployment tax in more than one state. Answer question 2 regarding whether the state where you paid wages has a credit reduction.
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Complete the second section to determine the FUTA tax before the adjustments for the calendar year in which you are applying. Write down the total payments to all employees on line 3 and the payments exempt from the FUTA tax on line 4. Check all the boxes from 4a to 4e that apply concerning the exempt payments: fringe benefits, retirement/pension, group-term life insurance, dependent care and other. Pen in the total payments to each employee that were in excess of $7000 on line 5. Calculate the subtotal by adding the payments exempt to total payments and place the number on line 6. Subtract the total payments to all employees to the subtotal to get the total taxable FUTA wages for line 7. Multiply total taxable FUTA wages by .008 to get the FUTA tax amount before deductions and place the amount on line 8.
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Proceed to the third section of the 940 form to determine adjustments. On line 9, multiply the total taxable FUTA wages by .054 if all taxable FUTA wages were excluded from state unemployment tax. Fill out the worksheet in the instructions for line 10 regarding whether only some of the taxable FUTA wages were excluded, or if you paid late concerning the state unemployment tax. Write the total payments to all employees on Schedule form A if a credit reduction applies concerning your payments to answer the question on line 11.
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Complete the fourth part of the 940 form by determining the FUTA tax and balance due or overpayment. Add the amount for FUTA taxes before adjustments to all amounts in the third section you completed and place that amount on line 12. Fill in the FUTA tax that was deposited for the year, which includes any overpayment from a prior year, on line 13. Write in the balance due on line 14.
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Figure out your tax status by looking at the balance amount. If the amount is more than $500, you have to deposit your tax. If the amount is less than $500, you must file a payment with this return. If the total tax after adjustments is more than the deposited FUTA tax, place the difference on line 15 and check the box on whether you want the difference applied to the next return or to send a refund.
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Complete part five only if line 12 exceeds $500, or proceed to the next section. Complete line 16 along with 16a through 16d by reporting the FUTA tax liability by quarter. Add all the quarters together to get the total tax liability for the year and place that amount on line 17. This amount should equal the amount on line 12. Fill out section six on whether you want an employee, paid tax preparer or someone else to discuss the return with the IRS. Write down the designee's name, phone number and a special 5-digit PIN number. Complete the form by signing and dating it along with providing a daytime phone number.
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References
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