Instructions for Form 940 (2012)

What's the Purpose of Form 940?

Use Form 940 to report your annual Federal Unemployment Tax Act (FUTA) tax. Together with state unemployment tax systems, the FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs. Most employers pay both a federal and a state unemployment tax. Only employers pay FUTA tax. Do not collect or deduct FUTA tax from your employees' wages.

The FUTA tax applies to the first $7,000 you pay to each employee during a calendar year after subtracting any payments exempt from FUTA tax.

These instructions give you some background information about Form 940. They tell you who must file the form, how to fill it out line by line, and when and where to file it.

Who Must File Form 940?

Except as noted below, if you answer “Yes” to either one of these questions, you must file Form 940.

Did you pay wages of $1,500 or more to employees in any calendar quarter during 2011 or 2012?
Did you have one or more employees for at least some part of a day in any 20 or more different weeks in 2011 or 20 or more different weeks in 2012? Count all full-time, part-time, and temporary employees. However, if your business is a partnership, do not count its partners.

If your business was sold or transferred during the year, each employer who answered “Yes” to at least one question above must file Form 940. However, do not include any wages paid by the predecessor employer on your Form 940 unless you are a successor employer. For details, see Successor employer under Type of Return.

If you are not liable for FUTA tax for 2012 because you made no payments to employees in 2012, check box c in the top right corner of the form. Then go to Part 7, sign the form, and file it with the IRS.

If you will not be liable for filing Form 940 in the future because your business has closed or because you stopped paying wages, check box d in the top right corner of the form. See Final: Business closed or stopped paying wages under Type of Return for more information.

For Employers of Household Employees . . .

If you are a household employer, you must pay FUTA tax on wages that you paid to your household employees only if you paid cash wages of $1,000 or more in any calendar quarter in 2011 or 2012.

A household employee performs household work in a:

Private home,
Local college club, or
Local chapter of a college fraternity or sorority.

Generally, employers of household employees must file Schedule H (Form 1040), Household Employment Taxes, instead of Form 940.

However, if you have other employees in addition to household employees, you can choose to include the FUTA taxes for your household employees on Form 940 instead of filing Schedule H (Form 1040). If you choose to include household employees on your Form 940, you must also file Form 941, Employer's QUARTERLY Federal Tax Return; Form 943, Employer's Annual Federal Tax Return for Agricultural Employees; or Form 944, Employer's ANNUAL Federal Tax Return; to report social security, Medicare, and any withheld federal income taxes for your household employees.

See Pub. 926, Household Employer's Tax Guide, for more information.

For Agricultural Employers . . .

File Form 940 if you answer “Yes” to either of these questions.

Did you pay cash wages of $20,000 or more to farmworkers during any calendar quarter in 2011 or 2012?
Did you employ 10 or more farmworkers during some part of the day (whether or not at the same time) during any 20 or more different weeks in 2011 or 20 or more different weeks in 2012?

Count wages you paid to aliens who were admitted to the United States on a temporary basis to perform farmwork (workers with H-2A visas). However, wages paid to “H-2A visa workers” are not subject to FUTA tax.

See Pub. 51 (Circular A), Agricultural Employer's Tax Guide, for more information.

For Indian Tribal Governments . . .

Services rendered by employees of a federally recognized Indian tribal government employer (including any subdivision, subsidiary, or business enterprise wholly owned by the tribe) are exempt from FUTA tax and no Form 940 is required. However, the tribe must have participated in the state unemployment system for the full year and be in compliance with applicable state unemployment law. For more information, see section 3309(d).

For Tax-Exempt Organizations . . .

Religious, educational, scientific, charitable, and other organizations described in section 501(c)(3) and exempt from tax under section 501(a) are not subject to FUTA tax and do not have to file Form 940.

For Employers of State or Local Governments. . .

Services rendered by employees of a state of a political subdivision or instrumentality of the state are exempt from FUTA tax and no Form 940 is required.

When Must You File Form 940?

The due date for filing Form 940 for 2012 is January 31, 2013. However, if you deposited all your FUTA tax when it was due, you may file Form 940 by February 11, 2013.

If we receive your return after the due date, we will treat your return as filed on time if the envelope containing your return is properly addressed, contains sufficient postage, and is postmarked by the U.S. Postal Service on or before the due date or sent by an IRS-designated private delivery service on or before the due date. However, if you do not follow these guidelines, we will consider your return filed when it is actually received. For a list of IRS-designated private delivery services, see Pub. 15 (Circular E).

Where Do You File?

Where you file depends on whether you include a payment (check or money order) with your return. However, mail your amended return to the Without a payment address even if a payment is included.

If you are in . . .		Without a payment . . .	With a payment . . .
EXCEPTION for tax-exempt organizations, Federal, State and Local Governments, and Indian Tribal Governments, regardless of your location		Department of the Treasury Internal Revenue Service Ogden, UT 84201-0046	Internal Revenue Service P.O. Box 37940 Hartford, CT 06176-7940
Connecticut Delaware District of Columbia Florida Georgia Illinois Indiana Kentucky Maine Maryland Massachusetts Michigan New Hampshire	New Jersey New York North Carolina Ohio Pennsylvania Rhode Island South Carolina Tennessee Vermont Virginia West Virginia Wisconsin	Department of the Treasury Internal Revenue Service Cincinnati, OH 45999-0046	Internal Revenue Service P.O. Box 804521 Cincinnati, OH 45280-4521
Alabama Alaska Arizona Arkansas California Colorado Hawaii Idaho Iowa Kansas Louisiana Minnesota Mississippi	Missouri Montana Nebraska Nevada New Mexico North Dakota Oklahoma Oregon South Dakota Texas Utah Washington Wyoming	Department of the Treasury Internal Revenue Service Ogden, UT 84201-0046	Internal Revenue Service P.O. Box 37940 Hartford, CT 06176-7940
Puerto Rico U.S. Virgin Islands		Internal Revenue Service P.O. Box 409101 Ogden, UT 84409	Internal Revenue Service P.O. Box 37940 Hartford, CT 06176-7940
If the location of your legal residence, principal place of business, office, or agency is not listed . . .		Internal Revenue Service P.O. Box 409101 Ogden, UT 84409	Internal Revenue Service P.O. Box 37940 Hartford, CT 06176-7940

Private delivery services cannot deliver to P.O. boxes. You must use the U.S. Postal Service to mail an item to a P.O. box address.

Credit for State Unemployment Tax Paid to a State Unemployment Fund

You get a credit for amounts you pay to a state (including the District of Columbia, Puerto Rico, and the U.S. Virgin Islands) unemployment fund by January 31, 2013 (or February 11, 2013, if that is your Form 940 due date). Your FUTA tax will be higher if you do not pay the state unemployment tax timely. If you did not pay all state unemployment tax by the due date of Form 940, see the line 10 instructions.

State unemployment taxes are sometimes called “contributions.” These contributions are payments that a state requires an employer to make to its unemployment fund for the payment of unemployment benefits. They do not include:

Any payments deducted or deductible from your employees' pay;
Penalties, interest, or special administrative taxes; and
Voluntary amounts you paid to get a lower assigned state experience rate.

Additional credit. You may receive an additional credit if you have a state experience rate lower than 5.4% (.054). This applies even if your rate varies during the year. This additional credit is the difference between your actual state unemployment tax payments and the amount you would have been required to pay at 5.4%.

Special credit for successor employers. You may be eligible for a credit based on the state unemployment taxes paid by a predecessor. You may claim this credit if you are a successor employer who acquired a business in 2012 from a predecessor who was not an employer for FUTA purposes and, therefore, was not required to file Form 940 for 2012. See section 3302(e). You can include amounts paid by the predecessor on the Worksheet as if you paid them. For details on successor employers, see Successor employer under Type of Return. If the predecessor was required to file Form 940, see the line 5 instructions.

When Must You Deposit Your FUTA Tax?

Although Form 940 covers a calendar year, you may have to deposit your FUTA tax before you file your return. If your FUTA tax is more than $500 for the calendar year, you must deposit at least one quarterly payment.

You must determine when to deposit your tax based on the amount of your quarterly tax liability. If your FUTA tax is $500 or less in a quarter, carry it over to the next quarter. Continue carrying your tax liability over until your cumulative tax is more than $500. At that point, you must deposit your tax for the quarter. Deposit your FUTA tax by the last day of the month after the end of the quarter. If your tax for the next quarter is $500 or less, you are not required to deposit your tax again until the cumulative amount is more than $500.

Fourth quarter liabilities. If your FUTA tax for the fourth quarter (plus any undeposited amounts from earlier quarters) is more than $500, deposit the entire amount by January 31, 2013. If it is $500 or less, you can either deposit the amount or pay it with your Form 940 by January 31, 2013.

In years when there are credit reduction states, you must include liabilities owed for credit reduction with your fourth quarter deposit.

When To Deposit Your FUTA Tax

If your undeposited FUTA tax is more than $500 on . . .*	Deposit your tax by . . .
March 31	April 30
June 30	July 31
September 30	October 31
December 31	January 31
*Also, see the instructions for line 16.

If any deposit due date falls on a Saturday, Sunday, or legal holiday, you may deposit on the next business day.

How Do You Figure Your FUTA Tax Liability for Each Quarter?

You owe FUTA tax on the first $7,000 of wages that you paid to each employee during the calendar year. The FUTA tax is 6.0% (.060) for 2012. Most employers receive a maximum credit of up to 5.4% (.054) against this FUTA tax. Every quarter, you must figure how much of the first $7,000 of each employee's annual wages you paid during that quarter.

Figure Your Tax Liability

Before you can figure the amount to deposit, figure your FUTA 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 .006.

The tax rates are based on your receiving the maximum credit against FUTA taxes. You are entitled to the maximum credit if you paid all state unemployment tax by the due date of your Form 940 or if you were not required to pay state unemployment tax during the calendar year due to your state experience rate.

Example.

During first quarter, you had three employees: Employees A, B, and C. You paid $11,000 to Employee A, $2,000 to Employee B, and $4,000 to Employee C.

To figure your liability for the first quarter, add the first $7,000 of each employee's wages:
$7,000	Employee A's wages subject to FUTA tax
2,000	Employee B's wages subject to FUTA tax
+ 4,000	Employee C's wages subject to FUTA tax
$13,000	Total wages subject to FUTA tax for the first quarter

$13,000	Total wages subject to FUTA tax for the first quarter
x .006	Tax rate (based on maximum credit of 5.4%)
$78	Your liability for the first quarter

In this example, you do not have to make a deposit because your liability is $500 or less for the first quarter. However, you must carry this liability over to the second quarter.

If any wages subject to FUTA tax are not subject to state unemployment tax, you may be liable for FUTA tax at a higher rate (up to 6.0%). For instance, in certain states, wages paid to corporate officers, certain payments of sick pay by unions, and certain fringe benefits are excluded from state unemployment tax.

Example.

Employee A and Employee B are corporate officers whose wages are excluded from state unemployment tax in your state. Employee C's wages are not excluded from state unemployment tax. During the first quarter, you paid $11,000 to Employee A, $2,000 to Employee B, and $4,000 to Employee C.

$ 9,000	Total FUTA wages for Employees A and B in first quarter
x .060	Tax rate
$540	Your liability for the first quarter for Employees A and B

$4,000	Total FUTA wages subject to state unemployment tax
x .006	Tax rate (based on maximum credit of 5.4%)
$24	Your liability for the first quarter for Employee C

$540	Your liability for the first quarter for Employees A and B
+ 24	Your liability for first quarter for Employee C
$564	Your liability for the first quarter for Employees A, B, and C
In this example, you must deposit $564 by April 30 because your liability for the first quarter is more than $500.

How Must You Deposit Your FUTA Tax?

You Must Deposit Your FUTA Tax Using EFT

You must deposit all depository taxes using electronic funds transfers (EFT). Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). To get more information or to enroll in EFTPS, visit the EFTPS website at www.eftps.gov, or call 1-800-555-4477. Additional information about EFTPS is also available in Pub. 966.

If your business is new, IRS will automatically pre-enroll you in EFTPS when you apply for an employer identification number (EIN). Follow the instructions on your EIN package to activate your enrollment.

To make your EFTPS deposits on time, you must initiate the transaction by 8 p.m. Eastern time the day before the date the deposit is due.

Same-day payment option.

If you fail to initiate a 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 on time by using the Federal Tax Application (FTA). To use the same-day wire payment method, you will need to make arrangements with your financial institution ahead of time. Please check with your financial institution regarding availability, deadlines, and costs. Your financial institution may charge you a fee for payments made this way. To learn more about the information you will need to provide your financial institution to make a same-day wire payment, visit www.eftps.gov to download the Same-Day Payment Worksheet.

Timeliness of federal tax deposits.

If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. A business day is any day other than a Saturday, Sunday, or legal holiday. The term “legal holiday” for deposit purposes includes only those legal holidays in the District of Columbia. Legal holidays in the District of Columbia are provided in Pub. 15 (Circular E).

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, and
Ensure your checks for tax payments are valid.

If you receive a notice about a penalty after you file this return, reply to the notice with an explanation and we will determine if you meet reasonable-cause criteria. Do not attach an explanation when you file your Form 940.

Can You Amend a Return?

You use the 2012 Form 940 to amend a return that you previously filed for 2012. If you are amending a return for a previous year, use the previous year's Form 940.

Follow the steps below to amend your return.

Use a paper return to amend a Form 940 filed under an electronic filing program.
Check the amended return box in the top right corner of Form 940, page 1, box a.
Fill in all the amounts that should have been on the original form.
Sign the form.
Attach an explanation of why you are amending your return. For example, tell us if you are filing to claim credit for tax paid to your state unemployment fund after the due date of Form 940.
File the amended return using the Without a payment address (even if a payment is included) under Where Do You File.
If you file an amended return for an aggregate Form 940, be sure to attach Schedule R (Form 940). Complete Schedule R (Form 940) only for employers who have adjustments on the amended Form 940.

Completing Your Form 940

Follow These Guidelines to Correctly Fill Out the Form

To help us accurately scan and process your form, please follow these guidelines.

Make sure your business name and EIN are on every page of the form and any attachments.
If you type or use a computer to fill out your form, use a 12-point Courier font, if possible.
Make sure you enter dollars to the left of the preprinted decimal point and cents to the right.
Do not enter dollar signs or decimal points. Commas are optional.
You may choose to round your amounts to the nearest dollar, instead of reporting cents on this form. If you choose to round, you must round all entries. To round, drop the amounts under 50 cents and increase the amounts from 50 to 99 cents to the next dollar. For example, $1.49 becomes $1.00 and $2.50 becomes $3.00. If you use two or more amounts to figure an entry on the form, use cents to figure the answer and round the answer only.
If you have a line with the value of zero, leave it blank.

Employer Identification Number (EIN), Name, Trade Name, and Address

Enter Your Business Information at the Top of the Form

Enter your EIN, name, and address in the spaces provided. You must enter your name and EIN here and on page 2. Enter the business (legal) name that you used when you applied for your EIN on Form SS-4, Application for Employer Identification Number. For example, if you are a sole proprietor, enter “Ronald Smith” on the Name line and “Ron's Cycles” on the Trade Name line. Leave the Trade Name line blank if it is the same as your Name.

If you pay a tax preparer to fill out Form 940, make sure the preparer shows your business name exactly as it appeared when you applied for your EIN.

Employer identification number (EIN). The IRS monitors tax filings and payments by using a numerical system to identify taxpayers and to make sure that businesses comply with federal tax laws. A unique nine-digit EIN is assigned to all corporations, partnerships, and some sole proprietors. Businesses that need an EIN must apply for a number and use it throughout the life of the business on all tax returns, payments, and reports.

Your business should have only one EIN. If you have more than one and are unsure which one to use, call 1-800-829-4933 to verify your correct EIN.

If you do not have an EIN, apply for one by:

Visiting the IRS website at IRS.gov and clicking on Apply for an EIN Online under Tools.
Calling 1-800-829-4933 and applying by telephone, or
Filling out Form SS-4 and mailing it to the address in the Instructions for Form SS-4 or faxing it to the number in the Instructions for Form SS-4.

If you have not received your EIN by the time a return is due, write “Applied For” and the date you applied in the space shown for the EIN on pages 1 and 2 of your return.

If you are filing your tax return electronically, a valid EIN is required at the time the return is filed. If a valid EIN is not provided, the return will not be accepted. This may result in penalties.

Always be sure the EIN on the form you file exactly matches the EIN that the IRS assigned to your business. Do not use a social security number or individual taxpayer identification number (ITIN) on forms that ask for an EIN. Filing a Form 940 with an incorrect EIN or using the EIN of another's business may result in penalties and delays in processing your return.

Tell Us if You Change Your Name or Address

Notify the IRS immediately if you change your business name or address.

If your business name changes, write to the IRS using the Without a payment address under Where Do You File? Also see Pub. 1635, Employer Identification Number: Understanding Your EIN, for general information on EINs.
If your address changes, complete and mail Form 8822-B, Change of Address—Business. Do not attach Form 8822-B to your Form 940. Mail Form 8822-B separately to the address indicated on Form 8822-B.

Type of Return

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 filing. You may check more than one box.

Amended. If this is an amended return that you are filing to correct a return that you previously filed, check box a.

Successor employer. Check box b if you are a successor employer and:

You are reporting wages paid before you acquired the business by a predecessor who was required to file a Form 940 because the predecessor was an employer for FUTA tax purposes, or
You are claiming a special credit for state unemployment tax paid before you acquired the business by a predecessor who was not required to file a Form 940 because the predecessor was not an employer for FUTA tax purposes.

A successor employer is an employer who:

Acquires substantially all the property used in a trade or business of another person (predecessor) or used in a separate unit of a trade or business of a predecessor, and
Immediately after the acquisition, employs one or more people who were employed by the predecessor.

No payments to employees in 2012. If you are not liable for FUTA tax for 2012 because you made no payments to employees in 2012, check box c. Then go to Part 7, sign the form, and file it with the IRS.

Final: Business closed or stopped paying wages. If this is a final return because you went out of business or stopped paying wages and you will not be liable for filing Form 940 in the future, check box d. Complete all applicable lines on the form, sign it in Part 7, and file it with the IRS. Include a statement showing the address at which your records will be kept and the name of the person keeping the records.

Disregarded entities. A disregarded entity is required to file Form 940 using its name and EIN, not the name and EIN of its owner. An entity that has a single owner and is disregarded as separate from its owner for federal income tax purposes is treated as a separate entity for purposes of payment and reporting federal employment taxes. If the entity does not currently have an EIN, it must apply for one using one of the methods explained earlier. Disregarded entities include single-owner limited liability companies (LLCs) that have not elected to be taxed as a corporation for federal income tax purposes, qualified subchapter S subsidiaries, and certain foreign entities treated as disregarded entities for U.S. income tax purposes. Although a disregarded entity is treated as a separate entity for employment tax purposes, it is not subject to FUTA tax if it is owned by a tax-exempt organization under section 501(c)(3) and is not required to file Form 940. For more information, see Disregarded entities and qualified subchapter S subsidiaries in the Introduction section of Pub. 15 (Circular E).

Prev	Up	Next
	Home

General Instructions: Understanding Form 940