|Tax Topic #759
||2006 Tax Year
Form 940 & 940–EZ – Deposit Requirements
The Forms 940 and 940EZ, Employer's Annual Federal Unemployment (FUTA)
Tax Return, have been combined. The new single form is still generally
due by January 31st. If however, you timely deposit your FUTA tax liability,
you may file Form 940 by February 12th.
Although Form 940 covers a calendar year, you may have to make
deposits of the tax before filing the return. Deposit FUTA tax quarterly if
your FUTA tax liability exceeds $500. FUTA tax is computed based on the first
$7,000 of each employee's annual wages. Determine your FUTA tax liability
for each quarter by multiplying that quarter's part of the first $7,000 of
each employee's annual wages by the proper rate, taking into account contributions
to state unemployment funds. If, however, any part of the amounts you paid
to employees is exempt from state unemployment tax, you may be required to
use a greater rate on those amounts. For example, in certain states, wages
paid to corporate officers, certain payments of sick pay by unions, and certain
fringe benefits are exempt from state unemployment tax.
If your FUTA tax for any of the first three quarters of the year (plus
any undeposited amount from an earlier quarter) is over $500, deposit it by
the last day of the month after the end of the quarter. If it is $500 or less,
carry it to the next quarter; a deposit is not required.
For example, if your FUTA tax liability at the end of the first quarter,
March 31st, is $260, you do not have to make a deposit. If your FUTA tax liability
for the second quarter, which ends on June 30th, is $270, your total liability
through the end of June is now $530. You must deposit $530 by July 31st.
If any deposit due date falls on a Saturday, Sunday, or legal holiday,
you may deposit on the next business day.
If your FUTA tax for the fourth quarter (plus any undeposited amount from
an earlier quarter) is over $500, deposit the entire amount by January 31st.
If it is $500 or less, you can either make a deposit or pay it with your Form
940 by January 31st. If you paid any wages that are subject to the unemployment
compensation laws of a credit reduction state, you may owe additional FUTA
tax. Include the amount with your fourth quarter tax deposits. For 2004, New
York was a credit reduction state. The U.S. Department of Labor will announce
whether any states are credit reduction states for 2006.
If your FUTA tax liability is over $500 for any calendar quarter, you must
deposit your FUTA tax liability through the Electronic Federal Tax Payment
System (EFTPS) or by making payments to an authorized financial institution
using Form 8109, Federal Tax Deposit Coupon. If you use Form
8109, it is very important that it shows your correct employer identification
number, name, type of tax, and tax period. This information is used by the
IRS to credit your account. Your check or money order should be made payable
to the authorized bank where you make your deposit, not to
the IRS. If you are required to use EFTPS for your Form 941 (PDF) deposits, you must use EFTPS to deposit your FUTA taxes.
If your total FUTA tax liability is more than $500, you must complete the
Record of Quarterly Federal Unemployment Tax Liability on the new single redesigned Form
940, Part 5. This part of the form shows the IRS whether you deposited
your tax on time. You may be charged a penalty for late deposits, for mailing
your payment to the IRS instead of depositing it, or for failing to use EFTPS,
For Form 940 (PDF) filing requirements, refer
to Topic 760. For more information on deposit requirements and penalties,
refer to Publication 15, (Circular E), Employer's Tax Guide.
Refer to Publication 966 (PDF), Electronic Federal Tax Payment
System, for more information on EFTPS.
Previous | Index | Next
You can search for information in the entire Tax Prep Help section, or in the entire site. For a more focused search, put your search word(s) in quotes.
Tax Topic Categories | FAQ Categories | Tax Prep Help Main | Home