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4. Payments exempt from FUTA tax

Example:

If you enter an amount on line 4, check the appropriate box or

boxes on lines 4a through 4e to show the types of payments

You had 3 employees. You paid $44,000 to Employee A including

exempt from FUTA tax. You only report a payment as

$2,000 in health insurance benefits. You paid $8,000 to Employee B,

exempt from FUTA tax on line 4 if you included the

including $500 in retirement benefits. You paid $16,000 to Employee C,

payment on line 3.

including $2,000 in health and retirement benefits.

Some payments are exempt from FUTA tax because the

$ 2,000 Health insurance benefits for Employee A

payments are not included in the definition of wages or the

500 Retirement benefits for Employee B

services are not included in the definition of employment.

+ 2,000 Health and retirement benefits for Employee C

Payments exempt from FUTA tax may include:

$4,500 Total payments exempt from FUTA tax. You would

•

enter this amount on line 4 and check boxes 4a and

Fringe benefits, such as:

4c.

— The value of certain meals and lodging.

— Contributions to accident or health plans for employees,

5. Total of payments made to each employee in

including certain employer payments to a Health Savings

Account or an Archer MSA.

excess of $7,000

— Employer reimbursements (including payments to a third

Only the first $7,000 you paid to each employee in a calendar

party) for qualified moving expenses, to the extent that these

year is subject to FUTA tax. This $7,000 is called the FUTA

expenses would otherwise be deductible by the employee.

wage base.

— Payments for benefits excluded under section 125

Enter on line 5 the total of the payments over $7,000 you

(cafeteria) plans.

•

paid to each employee during 2008 after subtracting any

Group term life insurance.

payments exempt from FUTA tax shown on line 4.

For information about group term life insurance and other

payments for fringe benefits that may be exempt from FUTA

tax, see Pub. 15-B, Employer’s Tax Guide to Fringe Benefits.

Following our example:

•

Retirement/Pension, such as employer contributions to a

qualified plan, including a SIMPLE retirement account (other

You had 3 employees. You paid $44,000 to Employee A, $8,000 to

than elective salary reduction contributions) and a 401(k) plan.

Employee B, and $16,000 to Employee C, including a total of $4,500 in

•

payments exempt from FUTA tax for all 3 employees. (To determine the

Dependent care, such as payments (up to $5,000 per

total payments made to each employee in excess of the FUTA wage

employee, $2,500 if married filing separately) for a qualifying

base, the payments exempt from FUTA tax and the FUTA wage base

person’s care that allows your employees to work and that

must be subtracted from total payments. These amounts are shown in

would be excludable by the employee under section 129.

•

parentheses.)

Other payments, such as:

— All non-cash payments and certain cash payments for

Employees

agricultural labor, and all payments to “H-2(A)” visa workers.

Total payments to

$44,000

$8,000

$16,000

See For agricultural employers on page 2 or get Pub. 51

employees

(Circular A), Agricultural Employer’s Tax Guide.

Payments exempt from

(2,000)

(500)

(2,000)

— Payments made under a workers’ compensation law

FUTA tax

because of a work-related injury or sickness. See section 6

FUTA wage base

(7,000)

of Pub. 15-A, Employer’s Supplemental Tax Guide.

— Payments for domestic services if you did not pay cash

$35,000

$ 500

$ 7,000

wages of $1,000 or more (for all domestic employees) in any

$35,000

calendar quarter in 2007 or 2008. See Pub. 926, Household

500

Employer’s Tax Guide.

+ 7,000

— Payments for services provided to you by your parent,

$42,500 Total of payments made to each employee in excess of

spouse, or child under the age of 21. See section 3 of Pub.

$7,000. You would enter this amount on line 5.

15 (Circular E), Employer’s Tax Guide.

— Payments for certain fishing activities. See Pub. 334,Tax

If you are a successor employer . . . When you figure the

Guide for Small Businesses.

payments made to each employee in excess of $7,000, you

— Payments to certain statutory employees. See section 1

may include the payments that the predecessor made to the

of Pub. 15-A, Employer’s Supplemental Tax Guide.

employees who continue to work for you only if the

— Payments to nonemployees who are treated as your

predecessor was an employer for FUTA tax purposes resulting

employees by the state unemployment tax agency.

in the predecessor being required to file Form 940.

See section 3306 and its related regulations for more

information about FUTA taxation of retirement plan

contributions, dependent care payments, and other payments.

For more information on payments exempt from FUTA tax,

see section 15 in Pub. 15 (Circular E) or section 15 in Pub. 51

(Circular A).

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Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2008 Page 6

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