The IRS 940 Form, also known as the Employer’s Annual Federal Unemployment Tax Return, allows employers to report their “FUTA“ taxes. “FUTA” stands for Federal Unemployment Tax Act.
If you are an employer who paid at least $1,500 to your employees in any quarter in the previous tax year, or if you have hired employees for more than 20 weeks in a tax year, you are obliged to fill out the 940 Form and report your taxes. Basically, this covers all employers, especially those who run a business.
It is worth noting that this employment may be part-time, full-time, temporary, or seasonal employment. Besides FUTA, employers are also charged with SUTA, which is basically the same tax charged by the states.
In other words, you have no chance but to fill out the 940 Form and report your taxes. Another important detail about the 940 Form is that it is not collected from the employee’s paychecks but from the employers. Moreover, it applies to the first $7,000, which will be paid to each employee in a tax year.
Numbers and Dates You Need To Know Before Filling Out 940 Form
As of 2022, the tax rate is set at 6% for the first $7,000. If employers pay their taxes on time, they can benefit from a 0.6% deduction. $500 is the threshold for FUTA taxes. Employers do not have to report it before it reaches $500. However, once it reaches $500, you need to pay it on time.
There are four deadlines to report these taxes. These are March 31, June 30, September 30, and December 31. Depending on the day, there may be one or two-day differences these days. Employers have to deposit their taxes no longer than April 30 for March 31, July 31 for June 30, October 31 for September 30, and January 31 for the next year for December 31.
As you may enjoy a 0.6% discount on your deposits, which must be made on time, you will be imposed penalties for late payments. This penalty increases for each delayed day. If you make your deposit late for up to 5 days, your penalty rate will be 2%.
This rate can increase to 15% if you do not pay these taxes for more than 10 days. You need to pay attention to things such as making your deposits on time, filing your Form 940 accurately, and attaching Schedule R when necessary.
If this will be your first time filing the IRS 940 Form, you may also want to know how to do so. You can choose one of the two methods as e-filing or paper filing. The IRS encourages taxpayers to file their IRS forms with e-filing so that they can enjoy quicker and better processing.
For this reason, you can work with one of the companies or software authorized by the IRS or carry out the entire process on your own. Another important detail to know is if you are a multi-state employer, you must pay the state unemployment taxes in more than one state.
All you need to do is check the box available on line 1B of Form 940 and attach Schedule A, which will help you to determine the credit reduction information. Filling out the form is also pretty straightforward. You will need to provide your basic information and the total payments you have made to your employees.