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Part 2: Determine Your FUTA Tax Before

Type of Return

Adjustments for 2007

Review the box at the top of the form. If any line applies to you,

check the appropriate box to tell us which type of return you are

If any line in Part 2 does not apply, leave it blank.

filing. You may check more than one box.

3. Total payments to all employees

a. Amended. If this is an amended return that you are filing

to correct a return that you previously filed, check box a.

Report the total payments you made during the calendar year

b. Successor employer. Check box b if you are a

on line 3. Include payments for the services of all employees,

successor employer and:

even if the payments are not taxable for FUTA. Your method of

•

You are reporting wages paid before you acquired the

payment does not determine whether payments are wages.

business by a predecessor who was required to file a Form

You may have paid wages hourly, daily, weekly, monthly, or

940 because the predecessor was an employer for FUTA tax

yearly. You may have paid wages for piecework or as a

purposes, or

percentage of profits. Include:

•

You are claiming a special credit for state unemployment

•

tax paid before you acquired the business by a predecessor

Compensation, such as:

who was not required to file a Form 940 because the

— Salaries, wages, commissions, fees, bonuses, vacation

predecessor was not an employer for FUTA tax purposes.

allowances, and amounts you paid to full-time, part-time, or

A successor employer is an employer who:

temporary employees.

•

Acquires substantially all the property used in a trade or

Fringe benefits, such as:

business of another person (predecessor) or used in a

— Sick pay (including third-party sick pay if liability is

separate unit of a trade or business of a predecessor, and

transferred to the employer). For details on sick pay, see

•

Immediately after the acquisition, employs one or more

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

people who were employed by the predecessor.

— The value of goods, lodging, food, clothing, and non-cash

c. No payments to employees in 2007. If you are not liable

fringe benefits.

for FUTA tax for 2007 because you made no payments to

— Section 125 (cafeteria) plan benefits.

•

employees in 2007, check box c. Then go to Part 7, sign the

Retirement/Pension, such as:

form, and file it with the IRS.

— Employer contributions to a 401(k) plan, payments to an

d. Final: Business closed or stopped paying wages. If

Archer MSA, payments under adoption assistance

this is a final return because you went out of business or

programs, and contributions to SIMPLE retirement accounts

stopped paying wages and you will not be liable for filing

(including elective salary reduction contributions).

Form 940 in the future, check box d. Complete all applicable

— Amounts deferred under a non-qualified deferred

lines on the form, sign it in Part 7, and file it with the IRS.

compensation plan.

•

Include a statement showing the address at which your

Other payments, such as:

records will be kept and the name of the person keeping the

— Tips of $20 or more in a month that your employees

records.

reported to you.

— Payments made by a predecessor employer to the

employees of a business you acquired.

— Payments to nonemployees who are treated as your

Specific Instructions

employees by the state unemployment tax agency.

For details on wages and other compensation, see section 5

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

Part 1: Tell Us About Your Return

Example:

If any line in Part 1 does not apply, leave it blank.

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

1. If you were required to pay your state

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

unemployment tax in

1a. One state only . . .

$44,000 Amount paid to Employee A

Enter the two-letter U.S. Postal Service abbreviation for the

8,000 Amount paid to Employee B

state where you were required to pay your tax on line 1a. For a

16,000 Amount paid to Employee C

list of state abbreviations, see the Instructions for Schedule A

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

(Form 940) or visit the website for the U.S. Postal Service at

amount on line 3.

1b. More than one state (you are a multi-state employer) . . .

4. Payments exempt from FUTA tax

Check the box on line 1b. Then fill out Part 1 of Schedule A

You only report a payment as exempt from FUTA tax on

(Form 940), and attach it to your Form 940.

line 4 if you included the payment on line 3. If you enter an

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

2. If you paid wages in a state that is subject to

4a through 4e to show the types of payments exempt from

credit reduction . . .

FUTA tax.

Skip line 2 and go to line 3 because the U.S. Department of

Labor has announced that there are no credit reduction states

Some payments are exempt from FUTA tax because the

for tax year 2007.

payments are not included in the definition of wages or the

services are not included in the definition of employment.

A state that has not repaid money it borrowed from the

Payments exempt from FUTA tax may include:

federal government to pay unemployment benefits is called a

credit reduction state. The U.S. Department of Labor

•

Fringe benefits, such as:

determines which states are credit reduction states.

— The value of certain meals and lodging.

If you paid wages that are subject to the unemployment tax

— Contributions to accident or health plans for employees,

laws of a credit reduction state, you may have to pay more

including certain employer payments to a Health Savings

FUTA tax when filing your Form 940.

Account or an Archer MSA.

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Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2007 Page 5

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