What is Federal Tax Form 940?
Form 940 serves as the Employer’s Annual Federal Unemployment (FUTA) Tax Return. In conjunction with State Unemployment Tax systems, the FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs. Most employers pay both a federal and a state unemployment tax. Employers are required to pay FUTA tax and cannot collect or deduct FUTA tax from their employees' wages.
The FUTA tax only applies to the first $7,000 employers pay to each worker during the calendar tax year after subtracting any payments exempt from filing FUTA tax Form.
What is the Unemployment Tax Rate?
Unemployment Tax payments are based on employee wages and salaries, up to a maximum of $7000 of wages per year, per employee, at a rate of 0.6 percent. (The rate is 6%, but 5.4% is deducted if state unemployment taxes are paid).
Who Must File Form 940?
Your business must file Form 940 if:
You paid wages of $1,500 or more to employees during a quarter of the calendar year.
You had one or more employees work for [at least] some part of the day any 20 or more weeks within the past two years. Employers must consider all full-time, part-time, and temporary employees for this requirement, but not owners or partners.
When to File Form 940?
The deadline for filing Form 940 for the 2018 tax year is January 31, 2019. If you fully deposited all of your FUTA tax when it was due, you have until February 12, 2019 to file Form 940.
How Do I Complete Form 940?
IRS Form 940 is used to calculate the amount of Federal Unemployment Tax Liability of a business for the fiscal year. The form is also used to determine the amount of unpaid unemployment taxes.
Completing Form 940 would involve the following steps:
- Calculate the total amount of payroll (gross pay) for all employees for the tax year
- Then subtract payments not included in the unemployment tax liability.
- Subtract employee payments in excess of $7000 for the year, and
- Multiply the result ( Total Taxable FUTA Wages) by the rate of unemployment tax to get the Federal Unemployment Tax.
Total Unemployment Tax = Total taxable FUTA wages X FUTA rate.
(Total taxable FUTA wages = Gross Pay for all employees - payments not included in the unemployment tax liability - employee payments in excess of $7000 for the year)
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Steps to File Form 940 Online
Follow the simple steps to complete e-file form 940 to the IRS
- Create your free account
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- Enter your Employer Details
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- Complete Form 940 with our interview-style process
- Enter your 94x Online Signature PIN or complete Form 8453-EMP
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