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IRS Tax Forms > Form 940 Employer’s Annual Federal Unemployment (FUTA) Tax Return

Form 940 - Employer’s Annual FUTA Tax Return

             Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, is used to report the federal unemployment tax liability of an employer for the year.  Federal Unemployment Tax is not withheld from the earnings of employees.  It is solely paid by employers.  This tax is applied only to the first $7,000 paid to any employee during the calendar year, other than any payments which are exempt from FUTA tax.

             An employer is required to file Form 940 if they paid wages of at least $1,500 to employees in any calendar quarter during this year or the prior year, or if they had at least one employee for at least a portion of a day in any 20 or more weeks in the current year.  Employees to include are any full-time, part-time, or temporary employees.  Partners of a partnership are not considered employees for FUTA tax purposes. 


             Household employers are required to pay FUTA taxes on their household employees’ wages if the total cash wages in any calendar quarter of the current or prior year was at least $1,000.  Anyone that does household work in a private home, a local college club, or a local chapter of a college fraternity or sorority is considered a household employee.  Employers that have strictly household employees would report and pay their FUTA tax using Schedule H, Household Employment Taxes, rather than using Form 940.  In the case of an employer that has household employees as well as other employees, they can elect to report the FUTA tax for their household employees on Form 940 instead of on Schedule H.

             Agricultural employers must file Form 940 if they paid cash wages of at least $20,000 to farm workers for any calendar quarter in the prior or current year, or if they had at least ten farm worker employees for at least a portion of a day during at least 20 weeks in the current or prior year. 

            If the employer has paid state unemployment tax, they will receive a credit for that on their Form 940 to offset the federal unemployment tax amount.  Employers can receive an additional credit against their federal tax if their state unemployment experience rate is below 5.4%.  The amount of the credit is the difference between the actual state unemployment payments they made or will make and the amount they would have paid with a rate of 5.4%.

             There are some exceptions for certain organizations and their employees.  For example, religious, educational, scientific, charitable, and other tax-exempt organizations are not liable for FUTA tax, and therefore are not required to file Form 940.  Also, the employees of any state or local government are not subject to FUTA tax, and their employers do not need to file Form 940.

             Form 940 has a due date of January 31.  For those employers that deposited their total FUTA tax when due, the due date is extended to February 11, 2008 for the 2007 return.  

             If you need help with figuring out your income taxes or employment taxes, then you are in the right place.  Try out the CPA search feature on this website to find a qualified professional in your area to assist you with all your tax and accounting needs.

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