Line 1 — Total payments.   Enter the total payments (before any deductions) you made during the calendar year for services of employees, even if the payments are not taxable for FUTA tax. Include salaries, wages, commissions, fees, bonuses, vacation allowances, and amounts paid to temporary or part-time employees; the value of goods, lodging, food, clothing, and noncash fringe benefits; contributions to a 401(k) plan, payments to an Archer MSA, payments under adoption assistance programs, and contributions to SIMPLE retirement accounts (including elective salary reduction contributions); section 125 (cafeteria) plan benefits; and sick pay (including third-party sick pay if liability is transferred to the employer).

  For details on sick pay, see Pub. 15-A, Employer's Supplemental Tax Guide. Report amounts deferred under a nonqualified deferred compensation plan at the later of: (a) when services are performed or (b) when there is no substantial risk of forfeiture of the rights to the deferred amount. For details, see Regulations section 31.3306(r)(2)-1. Include tips of $20 or more in a month reported to you by your employees. Also, include payments made by a previous employer if you are counting those payments for the $7,000 wage base as explained under Successor employer below.

  Your method of payment does not determine whether payments are wages. Thus, you may pay wages hourly, daily, weekly, monthly, or yearly. You may pay wages for piecework or as a percentage of profits. You may pay wages in cash or some other way, such as goods, lodging, food, or clothing. For items other than cash, use their fair market value when paid.

Line 2 — Exempt payments.   The amounts reported on line 2 are exempt from FUTA tax. For FUTA tax purposes, “wages” and “employment” do not include every payment and every kind of service an employee may perform. In general, payments excluded from wages and payments for services excepted from employment are not subject to FUTA tax. Do not enter payments over $7,000 for each employee that you enter on
line 3.

  You may deduct exempt payments from total payments only if you explain them on line 2. Amounts that may be exempt from your state's unemployment tax may not be exempt from FUTA tax. For example, corporate officers' wages are not exempt from FUTA tax even though your state may exempt those wages from its unemployment tax.

  Enter payments for services such as the following on line 2. These payments also must be entered on
line 1.

  

  For more information, see section 15 in Circular E (Pub. 15) or section 15 in Circular A (Pub. 51), Agricultural Employer's Tax Guide.

Line 3 — Payments of more than $7,000 for services.   Enter the total of amounts over $7,000 you paid to each employee during 2003 after subtracting any exempt payments shown on line 2. For example, you had 10 employees and paid each $9,000 during the year, including $500 of exempt payments per employee. Enter $15,000 on line 3, computed as follows:

  

   Only the first $7,000 paid to each employee is subject to FUTA tax. Do not use the state wage base for this entry. The state wage base may be different from the Federal wage base of $7,000. Do not include exempt payments from line 2 in figuring the $7,000.

Line 5 — Total taxable wages.   This is the total amount subject to FUTA tax. Use this amount in Part II to compute the gross FUTA tax and the maximum credit.

Line 1 — Gross FUTA tax.   Multiply the total taxable wages from Part I, line 5, by .062. This is the maximum amount of FUTA tax.

Line 2 — Maximum credit.   Multiply the total taxable wages from Part I, line 5, by .054. This is the maximum credit against FUTA tax for state contributions.

Line 3 — Computation of tentative credit.   You must complete all applicable columns to receive any credit. Your state will provide an experience rate to you. If you have been assigned an experience rate of zero percent or more, but less than 5.4%, for all or part of the year, use columns (a) through (i). If you have not been assigned any experience rate, use columns (a), (b), (c), and (i) only. If you have been assigned a rate of 5.4% or higher, use columns (a), (b), (c), (d), (e), and (i) only. If you were assigned an experience rate for only part of the year or the rate was changed during the year, complete a separate line for each rate period.

  If you need additional lines, attach a separate statement with a similar format. Also, if you are a successor employer, see Special credit for successor employers, on page 3.

Line 3a — Totals.   Enter the totals of columns (h)
and (i).

Line 3b — Total tentative credit.   Add line 3a, columns (h) and (i). As noted above, column (i) includes only payments to your state unemployment fund that you made by the due date for filing Form 940. Payments made after the due date are eligible for a reduced credit and will appear on line 6 as described below.

Line 6 — Credit.   This is the credit allowable for your payments to state unemployment funds. If you made no late state contributions, enter the smaller of the amount from Part II, line 2 or line 3b. If you do not have to make payments to the state, enter zero on this line.

  

  If any state contributions were made after the Form 940 due date (February 2 or February 10 as explained under When To File on page 1), your credit for late contributions is limited to 90% of the amount that would have been allowable as a credit if such contributions were paid on or before the Form 940 due date.

  Only taxpayers who made late contributions should complete the worksheet below.

  

  Enter $1,950 from line H of the worksheet on Form 940, Part II, line 6. This is the allowable credit for your contributions to the state unemployment fund.

Line 9 — Balance due.    Make your check or money order payable to the “United States Treasury.” Write your EIN, “Form 940,” and “2003” on your check or money order. Enter the amount of your payment on Form 940-V at the bottom of Form 940. If the employer information is not preprinted on the payment voucher, enter the requested information. (Make certain also that the entity information above line A is properly completed.)

  If the amount on line 9 is under $1, you do not have to pay it. For payments over $100, see Depositing FUTA Tax on page 3.

Line 10 — Overpayment.   If the amount on line 10 is under $1, we will send a refund or apply it to your next return only on written request.

Complete this part only if your FUTA tax in Part II, line 7, is over $100.   To figure your FUTA tax for each quarter, multiply by .008 that part of the first $7,000 of each employee's annual wages you paid during the quarter. Enter the result in the space for that quarter. Your “Total for year” must equal your total FUTA tax shown in Part II, line 7.

  Record your FUTA tax based on when you pay wages, not on when you deposit it. For example, if you pay wages on March 28, your FUTA tax on those wages is $200, and you deposit the $200 on April 30, you would record that $200 in the first quarter, not in the second.

Third Party Designee.   If you want to allow any individual, corporation, firm, organization, or partnership to discuss your 2003 Form 940 with the IRS, check the “Yes” box in the “Third Party Designee” section of the return. Also, enter the name, phone number, and any five numbers the designee chooses as his or her personal identification number (PIN). The authorization applies only to the tax form upon which it appears.

  By checking the “Yes” box, you are authorizing the IRS to call the designee to answer any questions relating to the information reported on your tax return. You are also authorizing the designee to:

  You are not authorizing the designee to receive any refund check, bind you to anything (including additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee's authorization or desire automatic issuances of copies of notices, see Pub. 947, Practice Before the IRS and Power of Attorney.

  The Third Party Designee authorization automatically expires one year from the due date (without regard to extensions) for filing your 2003 Form 940. If you or your designee desire to terminate the authorization, a written statement conveying your wish to revoke the authorization should be submitted to the IRS Service Center where the return was processed.

Signature.   Form 940 must be signed as follows: The return may also be signed by a duly authorized agent of the taxpayer if a valid power of attorney has been filed.