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— Payments to nonemployees who are treated as your

— Payments to certain statutory employees. See section 1

employees by the state unemployment tax agency.

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

— Payments to nonemployees who are treated as your

For details on wages and other compensation, see section 5

employees by the state unemployment tax agency.

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

See section 3306 and its related regulations for more

information about FUTA taxation of retirement plan

Example:

contributions, dependent care payments, and other payments.

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

For more information on exempt payments, see section 15 in

Employee B, and $16,000 to Employee C.

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

$44,000 Amount paid to Employee A

Example:

8,000 Amount paid to Employee B

16,000 Amount paid to Employee C

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

$68,000 Total payments to employees. You would enter this

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

amount on line 3.

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

including $2,000 in health and retirement benefits.

4. Payments exempt from FUTA tax

$ 2,000 Health insurance benefits for Employee A

You only report an amount as exempt from FUTA on line 4

500 Retirement benefits for Employee B

if you included the amount on line 3. If you enter an amount

+ 2,000 Health and retirement benefits for Employee C

on line 4, check the appropriate box or boxes on lines 4a

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

through 4e to show the types of exempt payments you made.

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

Some payments are exempt from FUTA tax because the

4c.

payments are not included in the definition of wages or the

services are not included in the definition of employment.

Payments exempt from FUTA tax may include:

5. Total of payments made to each employee in

excess of $7,000

•

Fringe benefits, such as:

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

— The value of certain meals and lodging.

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

— Contributions to accident or health plans for employees,

wage base.

including certain employer payments to a Health Savings

Account or an Archer MSA.

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

— Employer reimbursements (including payments to a third

to each employee during 2006 after subtracting any exempt

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

payments shown on line 4.

expenses would otherwise be deductible by the employee.

— Payments for benefits excluded under section 125

Following our example:

(cafeteria) plans.

•

Group term life insurance.

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

For information about group term life insurance and other

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

payments for fringe benefits that may be exempt from FUTA

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

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

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

•

Retirement/Pension, such as employer contributions to a

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

qualified plan, including a SIMPLE retirement account (other

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

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

parentheses.)

•

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

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

Employees

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

Total payments to

$44,000

$8,000

$16,000

would be excludable by the employee under section 129.

employees

•

Other payments, such as:

Payments exempt from

(2,000)

(500)

(2,000)

FUTA tax

— All non-cash payments and certain cash payments for

FUTA wage base

(7,000)

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

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

$35,000

$ 500

$ 7,000

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

$35,000

— Payments made under a workers’ compensation law

500

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

+ 7,000

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

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

— Payments for domestic services if you did not pay cash

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

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

calendar quarter in 2005 or 2006. See Pub. 926, Household

Employer’s Tax Guide.

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

— Payments for services provided to you by your parent,

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

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

may include the payments that the predecessor made to the

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

employees who continue to work for you only if the

— Payments for certain fishing activities. See Pub. 595, Tax

predecessor was an employer for FUTA tax purposes and

Highlights for Commercial Fishermen.

therefore, was required to file Form 940.

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Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2006 Page 6

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