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unemployment tax, you must pay FUTA tax at the 6.2% (.062)

Example for successor employers:

rate. For example, if your state unemployment tax law excludes

wages paid to corporate officers or employees in specific

During the calendar year, the predecessor employer paid $5,000 to

occupations, and the only wages you paid were to corporate

Employee A. You acquired the predecessor’s business. After the

officers or employees in those specific occupations, you must

acquisition, you employed Employee A and paid Employee A an

pay FUTA tax on those wages at the full FUTA rate of 6.2%

additional $3,000 in wages. None of the amounts paid to Employee A

(.062). When you figured the FUTA tax before adjustments on

were payments exempt from FUTA tax.

line 8, it was based on the maximum allowable credit (5.4%) for

state unemployment tax payments. Because you did not pay

$5,000 Wages paid by predecessor employer

state unemployment tax, you do not have a credit and must

+ 3,000 Wages paid by you

figure this adjustment.

$8,000 Total payments to Employee A. You would include this

amount on line 3.

If line 9 applies to you, lines 10 and 11 do not apply to you.

Therefore, leave lines 10 and 11 blank. Do not fill out the

$8,000 Total payments to Employee A

worksheet in the instructions or Part 2, Schedule A (Form 940).

– 7,000 FUTA wage base

Note. Line 11 and Part 2 of Schedule A (Form 940) were

$1,000 Payments made to Employee A in excess of $7,000.

shaded out for 2006 because there are no credit reduction

states for 2006.

$1,000 Payments made to Employee A in excess of $7,000.

+ 5,000 Taxable FUTA wages paid by predecessor employer

10. If SOME of the taxable FUTA wages you paid

$6,000 You would include this amount on line 5.

were excluded from state unemployment tax,

OR you paid ANY state unemployment tax late

6. Subtotal

Fill out the worksheet on the next page. The worksheet takes

To figure your subtotal, add the amounts on lines 4 and 5 and

you step by step through the process of figuring your credit. On

enter the result on line 6.

page 9, you’ll find an example of how to use it. Do not complete

the worksheet if line 9 applied to you (see instructions above).

line 4

+ line 5

Before you can properly fill out the worksheet, you will

line 6

need to gather the following information:

•

Taxable FUTA wages (from line 7 of Form 940),

7. Total taxable FUTA wages

•

Taxable state unemployment wages,

•

To figure your total taxable FUTA wages, subtract line 6 from

The experience rates assigned to you by the states where

line 3 and enter the result on line 7.

you paid wages,

•

The amount of state unemployment taxes you paid on time

line 3

(On time means that you paid the state unemployment taxes by

− line 6

the due date for filing Form 940.), and

line 7

•

The amount of state unemployment taxes you paid late. (Late

means after the due date for filing Form 940.)

8. FUTA tax before adjustments

To figure your total FUTA tax before adjustments, multiply line 7

Do not include any penalties, interest, or unemployment

by .008 and enter the result on line 8.

taxes deducted from your employees’ pay in the amount

of state unemployment taxes. Also, do not include as

CAUTION

line 7

state unemployment taxes any special administrative taxes or

x .008

voluntary contributions you paid to get a lower assigned

line 8

experience rate or any surcharges, excise taxes, or

employment and training taxes. (These items are generally

Part 3: Determine Your Adjustments

listed as separate items on the state’s quarterly wage report.)

For line 3 of the worksheet:

If any line in Part 3 does not apply, leave it blank.

•

If any of the experience rates assigned to you were less than

9. If ALL of the FUTA wages you paid were

5.4% for any part of the calendar year, you must list each

excluded from state unemployment tax. . .

assigned experience rate separately on the worksheet.

•

If you were assigned six or more experience rates that were

Multiply line 7 by .054 and enter the result on line 9.

less than 5.4% for any part of the calendar year, you must use

another sheet to figure the additional credits and then include

line 7

those additional credits in your line 3 total.

x .054

line 9

After you complete the worksheet, enter the amount from

If you were not required to pay state unemployment tax

line 7 of the worksheet on line 10 of Form 940. Do not attach

because all of the wages you paid were excluded from state

the worksheet to your Form 940. Keep it with your records.

-7-

Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2006 Page 7

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