Depending on which state or states where your business has employees, filing requirements for unemployment tax obligations will include either state and Federal Unemployment Tax in separate filings, or just Federal Unemployment Tax in one filing.
This article deals just with Federal Unemployment Tax and the IRS Tax Form 940 Instructions which explain how to file Federal Unemployment Tax. This article will attempt to boil down the 940 instructions into its key points. Basically, you must file Federal Unemployment Tax wherever you have employees, and additionally some states have a tax as well, which requires a separate filing.
Federal unemployment tax filings – FUTA form 940
Your business is required to file an IRS Form 940 if your business employed anyone in the United States during the tax year, and paid wages of $1,500 or more in wages, and had at least one employee for some part of a day in any 20 or more weeks. If your employee was a personal household employee, like a maid or cleaner, the amount of wages goes down to $1,000.
Other more complicated rules exist for farms, governments including tribal governments and tax-exempt organizations. The Instructions for Form 940 from the IRS has details on those situations.
Your tax liability is on the first $7,000 of each employee’s annual wages. Filings are done quarterly, and the first $7,000 must be accounted for during each quarter’s Form 940 filing. If the total tax liability for all employees combined is less than $500 for any quarter a deposit is optional, though the tax liability must be carried over to the next quarters form. Deposits must be made electronically.
To help make your filing go smoothly, and avoid penalties and interest, the IRS recommends taking the care in filling out and filing your business’s Form 940
1. Check to be sure your business name and EIN number are on every page of the form and attachments.
2. If using a computer set the font to 12-point Courier if possible.
3. Take care to enter dollars and cents on the correct side of the pre-printed decimals.
4. Do not use dollar signs or decimal points. Commas are ok.
5. Round up to the nearest dollar instead of reporting cents on the Form 940.
If rounding be sure to do so in all boxes. More detailed information is available in the IRS Tax Form 940 instruction booklet. Be sure to use the 940 instructions to make sure the tax is determined and the form is filled out correctly.
Figure payroll taxes, and complete your payroll tax forms
Take advantage of Intuit’s simple, flexible, and easy to use online payroll services to ensure consistency and accuracy in paying your employees and sending timely, correct tax forms to the necessary government tax agencies. At Intuit, paycheck calculation is just the beginning of the services offered to small business owners. With their Online Payroll services, they will complete both your 940 federal and state tax forms, making it easy to pay and report all required payroll taxes to the correct government agencies. Take the 30 free trial.