1997 Tax Help Archives  

Form 940 and 940EZ - Deposit Requirements

This is archived information that pertains only to the 1997 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

As an employer, you may have to file a federal unemployment tax return, Form 940 or Form 940-EZ, after the close of the year. Refer to Topic 760 for filing information. If you are required to file Form 940 or Form 940-EZ, it generally is due by January 31st each year. However, you may have to make deposits of this tax quarterly before you file the return.

Only the first $7,000 paid to each employee during each calendar year is used to figure the tax. To determine if you owe a deposit of federal unemployment tax at the end of each calendar quarter, first figure the amount of wages you paid during the quarter that are subject to federal unemployment tax. Next, multiply the taxable wages you have just figured by eight tenths of one percent, that is, .008. If the amount is $100 or less, you do not have to make a deposit. Add this amount to the tax you figure for wages subject to unemployment tax at the end of the next quarter. If the amount you get is more than $100, a deposit is due.

If a deposit is due, you must make it by the last day of the month following the end of the quarter. For example: if your tax at the end of the first quarter, March 3lst, is $60, you do not have to make a deposit. If your tax for the second quarter, which ends on June 30th, is $70, your total liability through the end of June is now $130. You must deposit $130 by July 31st.

To see if you must deposit federal unemployment tax for the last quarter of the year, subtract the amounts previously deposited for the year from the tax reportable on Form 940 or Form 940-EZ.

If the result is more than $100, deposit it by January 31st. If it is $100 or less, you may either deposit it by January 31st or pay it with your Form 940 or Form 940-EZ. If you pay it with Form 940 or Form 940-EZ, you must include the payment voucher at the bottom of the return. Where you file the form depends on whether or not you are including a payment.

Beginning in 1997, if total deposits in 1995 were more than $50,000 you must make electronic deposits for all depository tax liabilities that occurred after June 30, 1997. The Electronic Federal Tax Payment System (EFTPS) must be used to make electronic deposits. Failure to make required deposits electronically will result in a Failure to Deposit Penalty. The penalty will be waived through June 30, 1998, if timely deposits are made using paper coupons, Form 8109. If you are not required to make electronic deposits you may voluntarily participate or continue to use Form 8109.

Take federal tax deposit coupons, Form 8109, with the payment to an authorized financial institution or Federal Reserve bank to make deposits. Be sure the coupon shows the correct employer identification number, name, type of tax, and tax year. The authorized financial institution or Federal Reserve bank cannot accept payment without a deposit coupon.

When you fill out Form 940 or Form 940-EZ, you must complete the Record of Quarterly Federal Unemployment Tax Liability if your total tax is over $100. This part of the form shows the IRS whether you deposited your tax on time. Refer to Publication 15, Employer's Tax Guide, for Late Deposit Penalties and Publication 566, Electronic Federal Tax Payment System. The publication can be ordered by calling 1-800-829-3676.

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