Try our https://intuit-payroll.org/ software in a free, no-obligation 30-day trial. Have one or more employees for at least some part of a day in at least 20 different weeks during the calendar year. Include all temporary, part, and full-time employees. Do not include partners in a partnership in the employee count. If you had paid salaries and wages of more than $15,000 to any employee in any quarter of 2013 or 2014. FUTA Tax is used to pay people a stipend or funds who have lost their job.

Read the separate instructions before you complete this form. PaycheckCity Payroll provides a partially completed Form 940 based on your payroll history for the selected company, year, and employee. To complete the form, we will take you through each section and question on Form 940.

Example of 940 form filled out

Some states borrow money from the federal government to pay unemployment benefits to state citizens. If they don’t pay the federal government back, they become a credit reduction state. For employers, this means that they will pay a higher FUTA tax rate as the government reduces SUTA tax credits by 0.3% for each year that the state owes on its loan. A credit reduction state is one that took loans from the federal government to meet its state unemployment tax liabilities but has not repaid the loans in time.

You can skip this section unless you have Form 940 Instructions in a credit reduction state or a part of employees’ FUTA wages were exempt from SUTA. The difference between Forms 940 and 941 lies in the type of employment tax reported. Form 940 is for federal unemployment, and 941 is for Medicare, Social Security, and federal income tax withholding. Form 940 is an annual form due every Jan. 31, and Form 941 is due quarterly, one month after the end of a quarter. I’ll keep this brief because we have a lot to discuss.

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The Federal Unemployment Tax Act tax is what employers pay the IRS to fund the unemployment program that pays eligible workers who have lost their jobs. Federal regulations only require employers to pay a maximum of 6% on each employee’s first $7,000 of earnings. At the end of each year, you’ll use Form 940 to determine and report the total amount of FUTA taxes you owe and have paid. Form 940 is an IRS tax form that is used to report Federal Unemployment or FUTA taxes. This is filed annually by employers that pay a federal unemployment tax.These taxes are specific to employers, no amount of unemployment taxes are withheld from their employees’ pay.