Form 940 and 940-EZ - Deposit Requirements

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For tax periods beginning after December 31, 2004, the FUTA tax deposit requirement has increased from $ 100 to $ 500 for taxes reported on Form 940 (PDF) and Form 940EZ (PDF).

Form 940 (PDF) (or Form 940EZ (PDF)), Employer's Annual Federal Unemployment (FUTA) Tax Return, is generally due by January 31st. Although Form 940 (PDF) 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. Determine your FUTA tax liability for each of the first three quarters by multiplying that quarter's part of the first $7,000 of each employee's annual wages by .008. 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. 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 of $500 or less 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.

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 timely filed Form 940 (PDF).

For example, if your tax at the end of the first quarter, March 3lst, is $260, you do not have to make a deposit. If your tax 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 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 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 Form 940 (PDF) taxes.

If your total tax is more than $500, you must complete the Record of Quarterly Federal Unemployment Tax Liability. 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, when required.

For Form 940 (PDF) or Form 940EZ (PDF) filing requirements, refer to Form 940 and 940-EZ - Employer's Annual Federal Unemployment Tax Returns. 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.


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