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State unemployment taxes are sometimes called

(.054) against this FUTA tax. Every quarter, you must figure

“contributions.” These contributions are payments that a state

how much of the first $7,000 of each employee’s annual wages

requires an employer to make to its unemployment fund for the

you paid during that quarter.

payment of unemployment benefits. They do not include:

Figure your tax liability

•

any payments deducted or deductible from your employees’

Before you can figure the amount to deposit, figure your FUTA

pay;

•

tax liability for the quarter. To figure your tax liability, add the

penalties, interest, or special administrative taxes; and

•

first $7,000 of each employee’s annual wages you paid during

voluntary amounts you paid to get a lower assigned state

the quarter, then multiply that amount by .008.

experience rate.

Additional credit. You may receive an additional credit if you

The .008 tax rate is based on your receiving the maximum

have a state experience rate lower than 5.4% (.054). This

credit against FUTA taxes. You are entitled to the maximum

applies even if your rate varies during the year. This additional

credit if you paid all state unemployment tax by the due date of

credit is the difference between your actual state unemployment

your Form 940 or if you were not required to pay state

tax payments and the amount you would have been required to

unemployment tax during the calendar year due to your state

pay at 5.4%.

experience rate.

Special credit for successor employers. You may be

Example. During the first quarter, you have 3 employees:

eligible for a credit based on the state unemployment taxes paid

Employees A, B, and C. You paid $11,000 to Employee A,

by a predecessor. You may claim this credit if you are a

$2,000 to Employee B, and $4,000 to Employee C during the

successor employer who acquired a business in 2008 from a

quarter.

predecessor who was not an employer for FUTA purposes and,

therefore, was not required to file Form 940 for 2008. See

To figure your liability for the first quarter, add the first $7,000 of each

section 3302(e). You can include amounts paid by the

employee’s wages:

predecessor on the Worksheet on page 8 as if you paid them.

$7,000 Employee A’s wages subject to FUTA tax

For details on successor employers, see Successor employer

2,000 Employee B’s wages subject to FUTA tax

under Type of Return, on page 5. If the predecessor was

+ 4,000 Employee C’s wages subject to FUTA tax

required to file Form 940, see the line 5 instructions on page 6.

$13,000 Total wages subject to FUTA tax for the first quarter

When Must You Deposit Your FUTA Tax?

$13,000 Total wages subject to FUTA tax for the first quarter

x .008 Tax rate (based on maximum credit of 5.4%)

Although Form 940 covers a calendar year, you may have to

$104 Your liability for the first quarter

deposit your FUTA tax before you file your return. If your FUTA

tax is more than $500 for the calendar year, you must deposit at

In this example, you do not have to make a deposit because your liability is

least one quarterly payment.

$500 or less for the first quarter. However, you must carry this liability over to

the second quarter.

You must determine when to deposit your tax based on the

amount of your quarterly tax liability. If your FUTA tax is $500 or

If any wages subject to FUTA tax are not subject to state

less in a quarter, carry it over to the next quarter. Continue

unemployment tax, you may be liable for FUTA tax at a higher

carrying your tax liability over until your cumulative tax is more

rate (up to 6.2%). For instance, in certain states, wages paid to

than $500. At that point, you must deposit your tax for the

corporate officers, certain payments of sick pay by unions, and

quarter. Deposit your FUTA tax by the last day of the month

certain fringe benefits are excluded from state unemployment

after the end of the quarter. If your tax for the next quarter is

tax.

$500 or less, you are not required to deposit your tax again until

Example. Employee A and Employee B are corporate

the cumulative amount is more than $500.

officers whose wages are excluded from state unemployment

Fourth quarter liabilities. If your FUTA tax for the fourth

tax in your state. Employee C’s wages are not excluded from

quarter (plus any undeposited amounts from earlier quarters) is

state unemployment tax. During the first quarter, you paid

more than $500, deposit the entire amount by February 2,

$11,000 to Employee A, $2,000 to Employee B, and $4,000 to

2009. If it is $500 or less, you can either deposit the amount or

Employee C.

pay it with your Form 940 by February 2, 2009.

In years when there are credit reduction states, you

$ 9,000 Total FUTA wages for Employees A and B in 1

quarter

must include liabilities owed for credit reduction with your

x .062 Tax rate

fourth quarter deposit.

$558 Your liability for the first quarter for Employees A and B

$4,000 Total FUTA wages subject to state unemployment tax

When To Deposit Your FUTA Tax

x .008 Tax rate (based on maximum credit of 5.4%)

$32 Your liability for the first quarter for Employee C

If your undeposited FUTA tax

is more than $500 on . . .*

Deposit your tax by . . .

$558 Your liability for the first quarter for Employees A and B

March 31

April 30

+ 32 Your liability for the first quarter for Employee C

June 30

July 31

$590 Your liability for the first quarter for Employees A, B, and C

September 30

October 31

December 31

January 31

In this example, you must deposit $590 by April 30 because your liability for

the 1

quarter is more than $500.

*Also, see the instructions for line 16 on page 10.

How Must You Deposit Your FUTA Tax?

If any deposit due date falls on a Saturday, Sunday, or

TIP

legal holiday, you may deposit on the next business day.

You may deposit your FUTA tax electronically by using EFTPS

or by depositing your tax with an authorized financial institution

(for example, a commercial bank that is qualified to accept

How Do You Figure Your FUTA Tax

federal tax deposits). The financial institution will send IRS a

Liability for Each Quarter?

record of your payment to credit to your business account.

You may deposit your FUTA tax using EFTPS

You owe a FUTA tax of 6.2% (.062) on the first $7,000 of

wages that you paid to each employee during the calendar

To expedite your deposit and confirm that IRS has received

year. Most employers receive a maximum credit of up to 5.4%

your payment, you may choose to deposit your tax using

-3-

Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2008 Page 3

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