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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

institution.

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

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