The 940 Form (2017) refers to the annual payroll tax report filed by employers to report and reconcile their federal unemployment tax liability. The form is submitted to the Internal Revenue Service (IRS) and helps determine the employer’s unemployment tax liability for the previous year.
Overview:
The 940 Form is specifically designed to calculate the Federal Unemployment Tax Act (FUTA) tax owed by employers. FUTA, enacted by the U.S. Congress, provides funds for unemployment benefits at the federal level. Employers are required to pay unemployment taxes based on a percentage of their employees’ wages, up to a certain wage base. The 940 Form assists in calculating this tax liability accurately.
Key Points:
- Reporting: The 940 Form is divided into sections that require employers to provide their basic information, details of their payments to employees, and any adjustments or credits. It is essential for employers to complete each section accurately to ensure compliance and to avoid potential penalties or audits.
- Wage Base: Employers must determine the Federal Unemployment Taxable Wage Base for the tax year to calculate their FUTA liability correctly. As of the 2017 tax year, the wage base is $7,000 per employee. This means that FUTA taxes are levied only on the first $7,000 of each employee’s wages.
- Tax Rates: The standard FUTA tax rate is 6%, but employers may be eligible for a credit of up to 5.4% if they pay their state unemployment taxes timely and in full. This effectively reduces the federal tax rate to 0.6%. However, if an employer’s state is credit-reduction state, the credit may be reduced or eliminated.
- Submission: The 940 Form must be filed annually by January 31st for the previous calendar year. This deadline may change if it falls on a weekend or holiday. Employers can submit the form electronically using the e-file system provided by the IRS or use traditional paper filing methods.
- Payment: Employers must accompany the Form 940 with their payment, if any federal unemployment tax is owed. If an employer’s tax liability for the year is $500 or less, they can pay along with their quarterly Form 941 deposit. On the other hand, if the federal unemployment tax liability exceeds $500, employers must make their deposits quarterly using Form 941 and pay the balance, if any, with the 940 Form by the January 31st deadline.
Consequences of Noncompliance:
Failure to file the 940 Form accurately and timely can result in penalties imposed by the IRS. Penalties may include late filing penalties, late payment penalties, or interest charges on the unpaid tax liability. Additionally, noncompliance may trigger an audit or other enforcement actions, which can lead to further monetary fines or other legal consequences.
Conclusion:
The 940 Form (2017) is a vital tool used by employers to report and reconcile their federal unemployment tax liability. It allows employers to accurately calculate their FUTA tax and ensure compliance with federal regulations. Understanding the nuances of this form is crucial for businesses to avoid penalties and maintain sound financial practices in the realm of payroll management.
