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Without a

amount by January 31, 2007. If it is $500 or less, you can either

If you are in . . .

payment . . .

With a payment . . .

deposit the amount or pay it with your Form 940 by January 31,

2007.

Puerto Rico

IRS

U.S.Virgin Islands

Ogden, UT

P.O. Box 105174

When To Deposit Your FUTA Tax

84201-0046

Atlanta, GA

30348-5174

If your undeposited FUTA tax

is more than $500 on . . .*

Deposit your tax by . . .

If the location of your legal

IRS

residence, principal place of

P.O. Box 409101

P.O. Box 105274

March 31

April 30

business, office, or agency is not Ogden, UT 84409

Atlanta, GA

June 30

July 31

listed . . .

30348-5274

September 30

October 31

December 31

January 31

Private delivery services cannot deliver to P.O. boxes.

You must use the U.S. Postal Service to mail an item to

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

a P.O. box address.

CAUTION

Credit for State Unemployment Tax Paid

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

TIP

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

to a State Unemployment Fund

You get a credit for amounts you pay to a state (including the

How Do You Figure Your FUTA Tax

District of Columbia, Puerto Rico, and the U.S. Virgin Islands)

unemployment fund by January 31, 2007 (or February 12,

Liability for Each Quarter?

2007, if that is your Form 940 due date.) Your FUTA tax will be

higher if you do not pay the state unemployment tax timely. See

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

the line 10 instructions on page 7, if you did not pay all state

wages that you paid to each employee during the calendar

unemployment tax by the due date of Form 940.

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

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’

pay;

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

•

penalties, interest, or special administrative taxes; and

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

•

voluntary amounts you paid to get a lower assigned state

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

experience rate.

the quarter, then multiply that amount by .008.

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%. See the Worksheet on page 8.

experience rate.

Special credit for successor employers. You may be eligible

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

for a credit based on the state unemployment taxes paid by a

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

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

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

employer who acquired a business in 2006 from a predecessor

quarter.

who was not an employer for FUTA purposes and, therefore,

was not required to file Form 940 for 2006. See section

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

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

the Worksheet on page 8 as if you paid them. For details on

employee’s wages:

successor employers, see b. Successor employer under Type

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

of Return, on page 5. If the predecessor was required to file

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

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

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

$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

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

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

$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

You must determine when to deposit your tax based on the

the second quarter.

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

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

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

carrying your tax liability over until your cumulative tax is more

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

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

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

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

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

after the end of the quarter. However, if your tax for the next

certain fringe benefits are excluded from state unemployment

quarter is $500 or less, you are not required to deposit your tax

tax.

again until the cumulative amount is more than $500.

Example. Employee A and Employee B are corporate

Fourth quarter liabilities. In years when there are credit

officers whose wages are excluded from state unemployment

reduction states, you must include liabilities owed for

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

credit reduction with your fourth quarter deposit. If your

state unemployment tax. During the first quarter, you paid

FUTA tax for the fourth quarter (plus any undeposited amounts

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

from earlier quarters) is more than $500, deposit the entire

Employee C.

-3-

Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2006 Page 3

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