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Final return. If you will not have to file Form 940 (or

wages in cash or some other way, such as goods,

940-EZ) in the future, check the box on the line below

lodging, food, or clothing. For items other than cash, use

question C and complete and sign the return. If you start

the fair market value when paid.

paying FUTA wages again, file Form 940 (or 940-EZ).

Line 2 — Exempt payments. The amounts reported on

Third party designee. If you want to allow an employee

line 2 are exempt from FUTA tax. For FUTA tax

of your business or an individual paid preparer to discuss

purposes, “wages” and “employment” do not include

your 2001 Form 940 with the IRS, check the “Yes” box in

every payment and every kind of service an employee

may perform. In general, payments excluded from wages

the “Third Party Designee” section of the return. Also,

enter the name, phone number, and any five numbers

and payments for services excepted from employment

the designee chooses as his or her personal identification

are not subject to FUTA tax. Do not enter payments

number (PIN). The designation must specify an individual

over $7,000 for each employee that you enter on

line 3.

and may not refer to your payroll office or a tax

preparation firm.

You may deduct exempt payments from total

By checking the “Yes” box, you are authorizing the

payments only if you explain them on line 2. Amounts

that may be exempt from your state’s unemployment tax

IRS to call the designated employee or paid preparer to

answer any questions that may arise during the

may not be exempt from FUTA tax. For example,

processing of your return. You are also authorizing the

corporate officers’ wages are not exempt from FUTA

designee to:

tax even though your state may exempt those wages

•

from its unemployment tax.

Give the IRS any information that is missing from your

return,

•

Enter payments for services such as the following on

Call the IRS for information about the processing of

line 2. These payments also must be entered on

your return or the status of your refund or payment(s),

line 1.

and

•

1. Agricultural labor if you did not meet either 1 or 2

Respond to certain IRS notices that you have shared

under Agricultural employers on page 2 and all

with the designee about math errors and return

payments to H-2(A) visa workers.

preparation. The notices will not be sent to the designee.

2. Benefit payments for sickness or injury under a

You are not authorizing the designee to receive any

workers’ compensation law.

refund check, bind you to anything (including additional

3. Household services if you did not pay total cash

tax liability), or otherwise represent you before the IRS. If

wages of $1,000 or more in any calendar quarter in 2000

you want to expand the designee’s authorization, see

or 2001.

Pub. 947, Practice Before the IRS and Power of

Attorney.

4. Certain family employment. (See section 3 in

Circular E.)

The designee authorization cannot be revoked.

5. Certain fishing activities. (See Pub. 595, Tax

However, the authorization will automatically expire on

Highlights for Commercial Fishermen.)

the due date (without regard to extensions) for filing your

6. Noncash payments for farmwork or household

2002 Form 940 (or 940-EZ).

services in a private home. (Only cash wages paid to

these workers are taxable.)

Part I — Computation of Taxable

7. Value of certain meals and lodging. (See section 5

in Circular E.)

Wages

8. Cost of group-term life insurance.

Line 1 — Total payments. Enter the total payments

9. Payments attributable to the employee’s

(before any deductions) you made during the calendar

contributions to a sick-pay plan.

year for services of employees, even if the payments are

10. Employer contributions to a SIMPLE retirement

not taxable for FUTA tax. Include salaries, wages,

account (other than elective salary reduction

commissions, fees, bonuses, vacation allowances, and

contributions) and employer contributions to a 401(k)

amounts paid to temporary or part-time employees; the

plan (if included on line 1).

value of goods, lodging, food, clothing, and noncash

11. Employer payments to an Archer MSA.

fringe benefits; contributions to a 401(k) plan, payments

12. Benefits excludable under a section 125

to an Archer MSA, payments under adoption assistance

(cafeteria) plan.

programs, and contributions to SIMPLE retirement

13. Certain statutory employees. (See section 1 in

accounts (including elective salary reduction

Pub. 15-A.)

contributions); section 125 (cafeteria) plan benefits; and

14. Services performed by an inmate of a penal

sick pay (including third-party sick pay if liability is

institution.

transferred to the employer).

15. Employer reimbursements (including payments to a

third-party) for qualified moving expenses, to the extent

For details on sick pay, see Pub. 15-A, Employer’s

such expenses would otherwise be deductible by the

Supplemental Tax Guide. Report amounts deferred

employee. (See Pub. 521, Moving Expenses.)

under a nonqualified deferred compensation plan at the

16. Any other exempt service or pay.

later of (a) when services are performed or (b) when

there is no substantial risk of forfeiture of the rights to the

deferred amount. For details, see Regulations section

For more information, see section 15 in Circular E or

31.3306(r)(2)-1. Include tips of $20 or more in a month

section 15 in Circular A, Agricultural Employer’s Tax

reported to you by your employees. Also, include

Guide (Pub. 51).

payments made by a previous employer if you are

Line 3 — Payments of more than $7,000 for services.

counting those payments for the $7,000 wage base as

Enter the total of amounts over $7,000 you paid each

explained under Successor employer on page 5.

employee during 2001 after subtracting any exempt

Your method of payment does not determine whether

payments shown on line 2. For example, you had 10

employees and paid each $9,000 during the year,

payments are wages. Thus, you may pay wages hourly,

including $500 of exempt payments per employee. Enter

daily, weekly, monthly, or yearly. You may pay wages for

piecework or as a percentage of profits. You may pay

$15,000 on line 3, computed as follows:

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Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2001 Page 4

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