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What is Form 940?
What is Form 940?
Form 940 is used to calculate a business' annual Federal Unemployment Tax Act (FUTA) tax. The
money from this tax goes towards paying unemployment compensation for those that have
lost their jobs.
What is Form 940?Because this tax is paid by the business, it is
not deducted from employee's payrolls. Using the business' information from the previous
calendar year, the form must be filled out and submitted by the end of February.
Is My Business Eligible?
The most important thing to consider when filling out this paperwork is if
your business is even required to pay this tax.
Is My Business Eligible?If the following two requirements are met,
your business must pay this tax.
Is My Business Eligible?
If it is found that paying the FUTA tax is required, one must then fill out the form.
There are 7 sections of this form which determines the base FUTA tax along with any
adjustments required.
Determining Your Base FUTA TaxPart two of Form 940 determines the base amount the
business must pay before any adjustments are made. Since the first $7,000 of each employee's income is taxable by the FUTA tax, all payments to all employees throughout the last
calendar year must be listed.
Determining Your Base FUTA TaxCertain payments and fringe benefits are exempt from this listing. Consult a tax professional to see if any of yours are. Once the sum is found, it is multiplied by
the effective tax rate. The resulting product is the base FUTA tax.
Calculating FUTA Tax AdjustmentsIf the business's expenses were not SUTA
taxable, or if the employer paid wages in a credit reduction state, certain adjustments
can be made to the FUTA tax in order to adjust for these changes.
Calculating FUTA Tax AdjustmentsIf some of the FUTA wages were exempt from the state
unemployment tax, or if any of the state unemployment taxes are going to be paid late, other adjustment must also be
made.
For More InformationVisit Our Website ….
www.efederaltaxpreparation.com