Instructions For Form 940 - 2016 Page 4

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How Do You Figure Your FUTA Tax
$ 9,000 Total FUTA wages for Employees A and B in first quarter
x 0.060 Tax rate
Liability for Each Quarter?
$540 Your liability for the first quarter for Employees A and B
You owe FUTA tax on the first $7,000 you pay to each employee
$4,000 Total FUTA wages subject to state unemployment tax
during the calendar year after subtracting any payments exempt
x 0.006 Tax rate (based on maximum credit of 5.4%)
from FUTA tax. The FUTA tax is 6.0% (0.060) for 2016. Most
$24 Your liability for the first quarter for Employee C
employers receive a maximum credit of up to 5.4% (0.054)
against this FUTA tax. Every quarter, you must figure how much
$540 Your liability for the first quarter for Employees A and B
of the first $7,000 of each employee's annual wages you paid
+ 24 Your liability for first quarter for Employee C
during that quarter.
$564 Your liability for the first quarter for Employees A, B, and C
Figure Your Tax Liability
In this example, you must deposit $564 by April 30 because your liability
Before you can figure the amount to deposit, figure your FUTA
for the first quarter is more than $500.
tax liability for the quarter. To figure your tax liability, add the first
$7,000 of each employee's annual wages you paid during the
quarter for FUTA wages paid and multiply that amount by 0.006.
How Must You Deposit Your FUTA
The tax rates are based on your receiving the maximum
Tax?
credit against FUTA taxes. You’re entitled to the maximum credit
if you paid all state unemployment tax by the due date of your
Form 940 or if you weren't required to pay state unemployment
You Must Deposit Your FUTA Tax Using EFT
tax during the calendar year due to your state experience rate.
You must use EFT to make all federal tax deposits. Generally, an
Example. During the first quarter, you had three employees:
EFT is made using EFTPS. To get more information or to enroll
Employees A, B, and C. You paid $11,000 to Employee A,
in EFTPS, visit EFTPS website at , or call
$2,000 to Employee B, and $4,000 to Employee C. None of the
1-800-555-4477, 1-800-733–4829 (TDD), or 1-800-244-4829
payments made were exempt from FUTA tax.
(Spanish). Additional information about EFTPS is also available
in Pub. 966.
To figure your liability for the first quarter, add the first $7,000 of each
If your business is new, IRS will automatically pre-enroll you
employee's wages subject to FUTA tax:
in EFTPS when you apply for an EIN. Follow the instructions on
$7,000 Employee A's wages subject to FUTA tax
your EIN package to activate your enrollment.
2,000 Employee B's wages subject to FUTA tax
For an EFTPS deposit to be on time, you must submit
+ 4,000 Employee C's wages subject to FUTA tax
the deposit by 8 p.m. Eastern time the day before the
!
$13,000 Total wages subject to FUTA tax for the first quarter
date the deposit is due.
CAUTION
$13,000 Total wages subject to FUTA tax for the first quarter
Same-day wire payment option. If you fail to submit a
x 0.006 Tax rate (based on maximum credit of 5.4%)
deposit transaction on EFTPS by 8 p.m. Eastern time the day
before the date a deposit is due, you can still make your deposit
$78 Your liability for the first quarter
on time by using the Federal Tax Collection Service (FTCS). To
use the same-day wire payment method, you will need to make
In this example, you don't have to make a deposit because your liability is
arrangements with your financial institution ahead of time.
$500 or less for the first quarter. However, you must carry this liability over
Please check with your financial institution regarding availability,
to the second quarter.
deadlines, and costs. Your financial institution may charge you a
If any wages subject to FUTA tax aren't subject to state
fee for payments made this way. To learn more about the
unemployment tax, you may be liable for FUTA tax at the
information you will need to provide to your financial institution to
maximum rate of 6.0%. For instance, in certain states, wages
make a same-day wire payment, visit the IRS website at
paid to corporate officers, certain payments of sick pay by
and click on Same-day wire.
unions, and certain fringe benefits are excluded from state
Timeliness of federal tax deposits. If a deposit is required
unemployment tax.
to be made on a day that isn't a business day, the deposit is
considered timely if it is made by the close of the next business
Example. Employee A and Employee B are corporate
day. A business day is any day other than a Saturday, Sunday,
officers whose wages are excluded from state unemployment
or legal holiday. The term “legal holiday” for deposit purposes
tax in your state. Employee C's wages aren't excluded from state
includes only those legal holidays in the District of Columbia. For
unemployment tax. During the first quarter, you paid $11,000 to
a list of legal holidays, see Pub. 15.
Employee A, $2,000 to Employee B, and $4,000 to Employee C.
How Can You Avoid Penalties and
Interest?
Penalties and interest are assessed at a rate set by law on taxes
paid late, returns filed late or incorrectly, insufficient payments
made, and failure to make deposits using EFT.
You can avoid paying penalties and interest if you:
Deposit or pay your tax when it is due,
File your completed Form 940 accurately and on time,
Attach Schedule R (Form 940) if required, and
Ensure your tax payments are honored by your financial
institution.
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Instructions for Form 940 (2016)

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