If you are an employer, other than a household or agricultural employer, you may have to file federal unemployment tax return, Form 940 or Form 940EZ for 1998, if either of the following situations apply:

1. You paid $1,500 or more in wages during any calendar quarter in 1997 or 1998; or
2. You had at least one employee work for some part of a day in any twenty or more different weeks in 1997 or 1998.

Count all regular, temporary, and part time employees for wages paid. If you are a Household employer you will generally file Schedule H of Form 1040 if you paid cash wages of $1,000 or more in any calendar quarter of 1997 or 1998 for household work in your private home. However, file Form 940 or 940EZ if you paid cash wages of $1,000 or more in any calendar quarter in 1997 or 1998 for household work in a local college club or a local chapter of a college fraternity or sorority.

If you are an agricultural employer, you will have to file Form 940 or 940-EZ for farm workers if:

1. You paid cash wages of $20,000 or more in any calendar quarter in 1997 or 1998; or
2. You had 10 or more farm workers during some part of a day for at least one day during any 20 or more different weeks in 1997 or 1998. Bona fide residents of Puerto Rico should refer to Topic 903.

Include cash compensation paid to aliens (also known as workers with H-2 (A) visas) admitted on a temporary basis to the U.S. to perform farm work, to see if you meet either test. However compensation paid to H-2 (A) visa holders is not subject to the Federal Unemployment Tax and should be entered as "Exempt Payments" on line 2 of either Form 940 or 940-EZ.

The gross federal unemployment tax rate for 1997 is 6.2% and is figured on the first $7,000 of wages you paid each employee in 1998. If you paid all of the state unemployment tax timely on the same wages, you are allowed a state credit of up to 5.4%. The federal tax rate after the credit is .8%.

If you do not pay the state unemployment tax timely, your credit for the late payment(s) is limited to 90% of the amount you would have been allowed, if paid on time. Employers in some states do not get the full credit because of special rules in the federal law. If there are any such states in 1998, the states and the amount by which the employer's credits must be reduced will be listed in Part I of Form 940. Be sure to check and see if your state is listed. If so, follow the instructions on the form to make the necessary computations in Part I.

You may be able to file Form 940-EZ, a simplified Federal unemployment tax return for 1998, if you meet four tests:

1. You made state unemployment contributions to only one state,
2. You paid all your state contributions by February 1, 1999 (February 10 if you deposited all FICA tax when due),
3. None of the wages you paid were paid in a credit reduction state; and
4. All of your Federal unemployment tax wages were also taxable for your state's unemployment tax.

The due date for the 1998 Form 940 or 940-EZ is February 1, 1999. However, if you deposited all taxes when due, you have until February 10, 1999, to file. For more information, see Publication 15, Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide.

Forms and publications can be downloaded from this site, or ordered by calling 1-800-829-3676.

For information on deposit rules, select Topic 759.

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