Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2003 Page 4


Employer identification number (EIN). If you do not
2. Benefit payments for sickness or injury under a
have an EIN, apply for one on Form SS-4, Application for
workers’ compensation law.
Employer Identification Number or by visiting the IRS
3. Household services if you did not pay total cash
website at If you do not have an
wages of $1,000 or more in any calendar quarter in 2002
EIN by the time a return is due, write “Applied For” and
or 2003.
the date you applied in the space shown for the number.
4. Certain family employment. (See section 3 in
Circular E (Pub. 15).)
Questions A through C. If you answer “Yes” to all the
5. Certain fishing activities. (See Pub. 595, Tax
questions, you may file Form 940-EZ, a simpler version
Highlights for Commercial Fishermen.)
of Form 940. If you answer “No” to any of the questions
6. Noncash payments for farmwork or household
(or you are a successor employer claiming a credit for
services in a private home. (Only cash wages paid to
state unemployment contributions paid by the prior
these workers are taxable.)
employer), you must file Form 940.
7. Value of certain meals and lodging. (See section 5
Final return. If you will not have to file Form 940 (or
in Circular E (Pub.15).)
Form 940-EZ) in the future, check the box on the line
8. Cost of group-term life insurance.
below question C and complete and sign the return. If
9. Payments attributable to the employee’s
you start paying FUTA wages again, file Form 940 (or
contributions to a sick-pay plan.
Form 940-EZ).
10. Employer contributions to a SIMPLE retirement
account (other than elective salary reduction
Part I. Computation of Taxable Wages
contributions) and employer contributions to a 401(k)
plan (if included on line 1).
Line 1 — Total payments. Enter the total payments
11. Employer payments to an Archer MSA.
(before any deductions) you made during the calendar
12. Benefits excludable under a section 125
year for services of employees, even if the payments are
(cafeteria) plan.
not taxable for FUTA tax. Include salaries, wages,
13. Certain statutory employees. (See section 1 in
commissions, fees, bonuses, vacation allowances, and
Pub. 15-A.)
amounts paid to temporary or part-time employees; the
14. Services performed by an inmate of a penal
value of goods, lodging, food, clothing, and noncash
fringe benefits; contributions to a 401(k) plan, payments
15. Employer reimbursements (including payments to a
to an Archer MSA, payments under adoption assistance
third party) for qualified moving expenses, to the extent
programs, and contributions to SIMPLE retirement
such expenses would otherwise be deductible by the
accounts (including elective salary reduction
employee. (See Pub. 521, Moving Expenses.)
contributions); section 125 (cafeteria) plan benefits; and
16. Any other exempt service or pay.
sick pay (including third-party sick pay if liability is
transferred to the employer).
For more information, see section 15 in Circular E
For details on sick pay, see Pub. 15-A, Employer’s
(Pub. 15) or section 15 in Circular A (Pub. 51),
Supplemental Tax Guide. Report amounts deferred
Agricultural Employer’s Tax Guide.
under a nonqualified deferred compensation plan at the
Line 3 — Payments of more than $7,000 for services.
later of: (a) when services are performed or (b) when
Enter the total of amounts over $7,000 you paid to each
there is no substantial risk of forfeiture of the rights to the
employee during 2003 after subtracting any exempt
deferred amount. For details, see Regulations section
payments shown on line 2. For example, you had 10
31.3306(r)(2)-1. Include tips of $20 or more in a month
employees and paid each $9,000 during the year,
reported to you by your employees. Also, include
including $500 of exempt payments per employee. Enter
payments made by a previous employer if you are
$15,000 on line 3, computed as follows:
counting those payments for the $7,000 wage base as
explained under Successor employer below.
Total payments (10 x $9,000) . . . . . . . . . . . . . $90,000
Your method of payment does not determine whether
Less: Exempt payments (10 x $500) . . . . . . . . ($5,000)
payments are wages. Thus, you may pay wages hourly,
daily, weekly, monthly, or yearly. You may pay wages for
Less: Total wage base amount (10 x $7,000) . . ($70,000)
piecework or as a percentage of profits. You may pay
Amount reported on line 3 . . . . . . . . . . . . . $15,000
wages in cash or some other way, such as goods,
lodging, food, or clothing. For items other than cash, use
Only the first $7,000 paid to each employee is
their fair market value when paid.
subject to FUTA tax. Do not use the state wage base
Line 2 — Exempt payments. The amounts reported on
for this entry. The state wage base may be different
line 2 are exempt from FUTA tax. For FUTA tax
from the Federal wage base of $7,000. Do not include
purposes, “wages” and “employment” do not include
exempt payments from line 2 in figuring the $7,000.
every payment and every kind of service an employee
Successor employer. If you acquired a business
may perform. In general, payments excluded from wages
from an employer that was required to file Form 940 (or
and payments for services excepted from employment
Form 940-EZ), you may count the wages that employer
are not subject to FUTA tax. Do not enter payments
paid to the employees who continue to work for you when
over $7,000 for each employee that you enter on
you figure the $7,000 wage base. Include on line 3 the
line 3.
payments made by the previous employer that you
You may deduct exempt payments from total
included on line 1.
payments only if you explain them on line 2. Amounts
If the first employer paid $7,000 or more to the
that may be exempt from your state’s unemployment tax
employee, also include on line 3 all the wages you paid
may not be exempt from FUTA tax. For example,
to that employee. If the first employer did not pay at least
corporate officers’ wages are not exempt from FUTA
$7,000 to the employee, subtract what the first employer
tax even though your state may exempt those wages
paid from $7,000. Then subtract that result from the
from its unemployment tax.
wages you paid to the employee, and include any result
Enter payments for services such as the following on
on line 3.
line 2. These payments also must be entered on
For example, during 2003, prior employer P paid
line 1.
$5,000 to employee Jones before the acquisition and
1. Agricultural labor if you did not meet either 1 or 2
acquirer A paid $3,000 to Jones after the acquisition.
under Agricultural employers on page 2 and all
Subtracting the $5,000 from $7,000 yields $2,000.
payments to “H-2(A)” visa workers.
Subtracting the $2,000 from $3,000 (wages paid by


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