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Special credit for successor employers. You may be

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

eligible for a credit based on the state unemployment taxes paid

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

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

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

successor employer who acquired a business in 2007 from a

quarter.

predecessor who was not an employer for FUTA purposes and,

therefore, was not required to file Form 940 for 2007. See

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

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

employee’s wages:

predecessor on the Worksheet on page 8 as if you paid them.

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

For details on successor employers, see b. Successor

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

employer under Type of Return, on page 5. If the predecessor

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

was required to file Form 940, see the line 5 instructions on

$13,000 Total wages subject to FUTA tax for the first quarter

page 6.

$13,000 Total wages subject to FUTA tax for the first quarter

When Must You Deposit Your FUTA Tax?

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

$104 Your liability for the first quarter

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

deposit your FUTA tax before you file your return. If your FUTA

In this example, you do not have to make a deposit because your liability is

tax is more than $500 for the calendar year, you must deposit at

$500 or less for the first quarter. However, you must carry this liability over to

least one quarterly payment.

the second quarter.

You must determine when to deposit your tax based on the

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

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

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

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

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

carrying your tax liability over until your cumulative tax is more

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

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

certain fringe benefits are excluded from state unemployment

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

tax.

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

Example. Employee A and Employee B are corporate

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

officers whose wages are excluded from state unemployment

again until the cumulative amount is more than $500.

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

Fourth quarter liabilities. In years when there are credit

state unemployment tax. During the first quarter, you paid

reduction states, you must include liabilities owed for

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

credit reduction with your fourth quarter deposit. If your

Employee C.

FUTA tax for the fourth quarter (plus any undeposited amounts

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

$ 9,000 Total FUTA wages for Employees A and B in 1

quarter

amount by January 31, 2008. If it is $500 or less, you can either

x .062 Tax rate

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

$558 Your liability for the first quarter for Employees A and B

2008.

$4,000 Total FUTA wages subject to state unemployment tax

When To Deposit Your FUTA Tax

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

$32 Your liability for the first quarter for Employee C

If your undeposited FUTA tax

is more than $500 on . . .*

Deposit your tax by . . .

$558 Your liability for the first quarter for Employees A and B

+ 32 Your liability for the first quarter for Employee C

March 31

April 30

$590 Your liability for the first quarter for Employees A, B, and C

June 30

July 31

September 30

October 31

In this example, you must deposit $590 by April 30 because your liability for

December 31

January 31

the 1

quarter is more than $500.

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

How Must You Deposit Your FUTA Tax?

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

TIP

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

You may deposit your FUTA tax electronically by using EFTPS

or by depositing your tax with an authorized financial institution

How Do You Figure Your FUTA Tax

(for example, a commercial bank that is qualified to accept

federal tax deposits). The financial institution will send IRS a

Liability for Each Quarter?

record of your payment to credit to your business account.

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

You may deposit your FUTA tax using EFTPS

wages that you paid to each employee during the calendar

To expedite your deposit and confirm that IRS has received

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

your payment, you may choose to deposit your tax using

(.054) against this FUTA tax. Every quarter, you must figure

EFTPS. To enroll, call 1-800-555-4477 or visit the EFTPS

how much of the first $7,000 of each employee’s annual wages

website at

you paid during that quarter.

Figure your tax liability

If your business is new, IRS will automatically pre-enroll you

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

in EFTPS when you apply for an employer identification number

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

(EIN). If you choose to deposit your tax using EFTPS, follow the

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

instructions on your EIN package to activate your enrollment.

the quarter, then multiply that amount by .008.

You may be required to use EFTPS. In some cases, you

The .008 tax rate is based on your receiving the maximum

may be required to deposit your tax using EFTPS. For

credit against FUTA taxes. You are entitled to the maximum

instance, you must use EFTPS in 2008 if:

credit if you paid all state unemployment tax by the due date of

•

the total payments of your employment tax, excise tax, and

your Form 940 or if you were not required to pay state

corporate income tax were more than $200,000 for 2006; or

unemployment tax during the calendar year due to your state

•

experience rate.

you were required to use EFTPS in 2007.

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Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2007 Page 3

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