How to Fill out IRS Form 940 (FUTA Tax Return)

a tax adjustment must be made in determining the cost of ________. This is a topic that many people are looking for. is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, would like to introduce to you How to Fill out IRS Form 940 (FUTA Tax Return). Following along are instructions in the video below:

“Form 940 script hi. Everyone i m priyanka prakash. Senior nstaff writer at fundera today. Today.

I ll be showing you how to fill out nform 940 employer s annual unemployment tax return more commonly called the futa ntax return you must file this form if you paid 1500. Nor. More in wages to employees during a calendar quarter of this year or the previous year. Nor if you employed anyone for at least 20 weeks of the year this form is due on january 31.

However you get an additional 10 calendar ndays to file. If you deposited all your futa taxes on time throughout the year now most employers have to pay futa at the nfederal level and state unemployment tax as you ll soon see the two are closely nrelated as a reminder futa tax is only paid by employers nso. This is not a tax that you would deduct from your employees wages. Okay.

Let s get started with the form. The top of the form is pretty straightforward. You re just going to note down your business. Ncontact information.

Including the ein business. Name and business address. I ll provide this information for a fictional nbusiness called abc bakery llc if your business operates under a trade name nthat s different from your business legal. Name.

You should also fill out the trade name nbox note that you must have an employer identification nnumber to file this form. If you don t have an ein you can apply for none for free using form ss. 4. Most of you watching this video will leave nthese boxes on the right blank.

But these might apply to you if you re filing an amended nform 940 recently acquired a business that had futa tax liabilities did not pay any nwages for the year or if you re closing down your business or completely stopped paying nwages in part 1 start by indicating whether you nhad to pay unemployment taxes in one state or in multiple states. If it s just in one state. You ll provide nthe state abbreviation in box 1a and if you had to pay state unemployment taxes in multiple nstates you will check off box 1b and complete and attach the accompanying schedule a to nform 940. This is how schedule a looks you would simply provide your ein and business nname and check off the boxes for the states in which you had to pay state unemployment ntax even if your state unemployment tax rate for nyour business was zero you have to fill out either box 1a or check off box 1b.


You can only leave both of these blank. If nthe wages that you paid to your employees were completely exempt from state unemployment ntaxes in this example i ll say that abc bakery npaid wages in just one state new york in line 2 indicate whether you paid wages nin. A credit reduction state. A credit reduction state is a state which nborrowed money from the federal government to pay unemployment benefits and hasn t paid nit back as a result you might have to pay more futa ntaxes.

The department of labor maintains an updated nlist of credit reduction states and usually just one or two sometimes no states end nup as credit reduction states for the year. If your state is a credit reduction state nyou would check off the box in line. 2. And attach schedule a to form 940.

New york. Usually is not a credit reduction nstate. So we ll leave this box blank in our example. Part.

2. Is where you determine your business s nfuta tax liability for the year in line. 3. Provide all wages.

Commissions nbonuses fringe benefits and other types of compensation that you paid to your employees nduring the year let s say abc. Bakery only has two employees nand paid each of them. 50000 for a total of 100000 in employee payments in line. 4.

Identify how much of those wages nif. Any was exempt from futa taxation and why for instance employer contributions to employee nretirement plans or to health plans are not taxable under futa in. This example let s say. 2000 of the 100000.

Nin payments was exempt because of retirement plan contributions we ll assume abc bakery paid 1000. To each nof its two employees in the form of retirement plan contributions we ll note down the total 2000. In exempt npayments and the reason is that it was a retirement plan contribution in line 5 indicate the total of taxable payments nmade to employees in excess of 7000. This is important because you only have to npay futa taxes on the first.


7000 that you paid to each employee each year anything over the 7000 wage base per employee nis exempt from futa taxes in this example each employee received. 49000 nin taxable wages after accounting for. The 1000 each in retirement plan contributions that 49000 of taxable wages is 42000 over nthe. 7000 wage base if you add up 42000 for each of the two nemployees that gives us 84000.

In excess payments in line 6 add up lines 4 and. Lines. 5 which nin this case gives us 86000. In line.

7. You can see your total futa taxable nwages by subtracting. Line. 6 from.

Line. 3 that gives us 14000. In this example in line. 8 multiply.

The number you got in. Nline. 7 by 006 because the futa tax rate is currently 06 for businesses that paid their nstate unemployment taxes on time in this example that multiplication gives nus at 84 part 3 is where you ll have to make certain nadjustments for state unemployment taxes. If this applies to you item.

9 and 10 show that if some or all of nthe wages that you paid were exempt from state unemployment taxes you have to pay a higher nfuta tax rate of up to 6 and items 9 or 10. Is where you would account for that difference. You also have to take an adjustment here in nline 11. If you paid wages in any credit reduction state.

We ll assume none of these apply in our nexample since the state of new york. Normally mirrors. Federal law for unemployment tax purposes. Nand.


New york is normally not a credit reduction state in part. 4. You would add in any adjustments. Nto your total futa tax liability.

Here the total of 84 remains unchanged since nnone of the adjustments in part 3 applied to abc bakery. So we ll bring down the 84 from line 8 down nto line. 12 in line. 13.

You ll need to note the amount nof. Futa taxes that you ve already deposited for the year businesses. Deposit food or taxes on a quarterly nbasis throughout the year. Typically using eftps.

Which is the electronic federal tax npayment system on this form. You ll be able to assess whether nyou have an outstanding balance of futa taxes. Owed or if you overdeposited your taxes throughout nthe year in this example. I ll assume that abc bakery ndeposited 74 throughout the year that means they have a balance of 10 due as the instructions here indicate since this n.

10. Is less than 500. I can simply include the 10 payment when filing this form. If you have an overpayment you can choose nwhether to receive a check as your refund or to have the overpayment applied to your nbusiness s next tax return let s move on to page.

2. Don t forget to provide your business. Name nand ein. Again at the top.

So that the irs does not lose any of your paperwork. If your annual futa tax due as shown on line n12 is greater than 500. You ll need to break down the amount that you owed for each quarter nof the year. I will skip this section.


Because my fictional nbusiness s futa liability was only 84 in line 12 in part. 6. You can designate a tax preparer nlawyer employee or another individual to speak to the irs on your business s behalf nabout this form. I ll just check off no here and assume nthat the owner of abc bakery llc does not want to designate any third party finally don t forget to sign and date.

The nform at the bottom and provide your name title and phone. Number you can only sign and date. After you print nout. The form.

So i ll leave those items blank for now and fill out the rest. I ll assume that betty business. The ceo of nabc bakery filled out this form if you hired someone to help you complete nform 940. They should fill out their information in the paid.

Preparer. Section. And that s it for your futa tax. Return irs nform 940.

There s a payment voucher at the bottom of nthe form. Which you ll need if you re going to be including payment with your return. The accompanying irs instructions to this nform will tell you the mailing address to file your return based on where your business. Nis located.

And whether you ll be including a payment with the form or not if you need additional help in filing form n940 we recommend purchasing payroll software gusto offers payroll software for small businesses nand assistance with filing a variety of payroll tax forms including form 940. We hope this was helpful in helping you complete nform 940 for more tax information and small business ninsights head over to https funderacom. Blog and subscribe to our youtube channel for more nvideos. ” .


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