Userid: ________ Leading adjust: -75% ❏ Draft ❏ Ok to Print

PAGER/SGML Fileid: I940.sgm (16-Nov-2001) (Init. & date)

Page 1 of 6 Instructions for Form 940 8:38 - 16-NOV-2001

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2001 Department of the Treasury

Internal Revenue Service

Instructions for Form 940

Employer’s Annual Federal Unemployment
(FUTA) Tax Return
Section references are to the Internal Revenue Code unless otherwise noted.

of Form 940. You may use it instead of Form 940 to

General Instructions report your annual FUTA tax if —
1. You paid unemployment contributions to only one
What’s New for 2001? state,
2. You paid all state unemployment contributions by
Electronic filing of Form 940. Form 940 can now be January 31, 2002 (February 11, 2002, if you deposited all
filed electronically. See Magnetic Media and Electronic FUTA tax when due), and
Reporting on page 3. 3. All wages that were taxable for FUTA tax were also
Third party designee. You can now allow an employee taxable for your state’s unemployment tax. If, for
or paid preparer to resolve certain tax issues with the example, you paid wages to corporate officers (these
IRS. See Third party designee on page 4 for more wages are taxable for FUTA tax) in a state that exempts
information. corporate officers’ wages from its unemployment tax, you
cannot use Form 940-EZ.
Items To Note A successor employer claiming a credit for state
Electronic deposit requirement. You may be required
to deposit Federal taxes, such as employment tax, excise
!
CAUTION
unemployment contributions paid by the prior
employer must file Form 940.
tax, and corporate income taxes, electronically using the
Electronic Federal Tax Payment System (EFTPS). See
Electronic deposit requirement on page 3 for details.
When To File
State unemployment information. You must contact File Form 940 for 2001 by January 31, 2002. However, if
your state unemployment tax office to receive your state you deposited all FUTA tax when due, you may file on or
reporting number, state experience rate, and details before February 11, 2002. Your return will be considered
about your state unemployment tax obligations. timely filed if it is properly addressed and mailed First
Worksheet for computing the Part II, line 6 credit if Class or sent by an IRS designated delivery service by
state contributions were paid late. Filers who made the due date. See Circular E, Employer’s Tax Guide
contributions to their state unemployment fund after the (Pub. 15), for a list of designated delivery services. Also
due date for filing Form 940 should complete the see Where To File on page 2.
worksheet provided in the instructions for Part II, line 6, Private delivery services cannot deliver items to
on page 5, to compute the allowable credit. Do not report
such contributions in Part II, line 3, column (i) or on line !
CAUTION
P.O. boxes.
3b. Any credit allowed for such state contributions will
appear on line 6.

Photographs of Missing Children Who Must File

The Internal Revenue Service is a proud partner with the Except as noted below, you must file Form 940 if Test 1
National Center for Missing and Exploited Children. or Test 2 applies.
Photographs of missing children selected by the Center Test 1. You paid wages of $1,500 or more in any
may appear in instructions on pages that would otherwise calendar quarter in 2000 or 2001.
be blank. You can help bring these children home by Test 2. You had one or more employees for at least
looking at the photographs and calling 1-800-THE-LOST some part of a day in any 20 or more different weeks in
(1-800-843-5678) if you recognize a child. 2000 or 20 or more different weeks in 2001.
Count all regular, temporary, and part-time employees.
Purpose of Form A partnership should not count its partners. If a business
Use Form 940 (or 940-EZ) to report your annual Federal changes hands during the year, each employer who
Unemployment Tax Act (FUTA) tax. FUTA tax, together meets Test 1 or 2 must file. For purposes of Test 1 or
with state unemployment systems, provides for payments Test 2 only, do not include wages paid by the prior (or
of unemployment compensation to workers who have lost subsequent) employer. But see Successor employer on
their jobs. Most employers pay both Federal and state page 5.
unemployment taxes. Only the employer pays FUTA Household employers. File a FUTA tax return only if
tax. Do not collect or deduct it from your employees’ you paid total cash wages of $1,000 or more (for all
wages. The tax applies to the first $7,000 you pay each household employees) in any calendar quarter in 2000 or
employee in a year after subtracting any exempt 2001 for household work in a private home, local college
payments. The $7,000 amount is the Federal wage base. club, or local chapter of a college fraternity or sorority.
Your state wage base may be different. Individuals, estates, and trusts that owe FUTA tax for
Form 940-EZ, Employer’s Annual Federal household work in a private home, in most cases, must
Unemployment (FUTA) Tax Return, is a simpler version file Schedule H (Form 1040), Household Employment

Cat. No. 13660I

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Taxes, instead of Form 940 (or 940-EZ). See the Service at the address listed for your location. No street
Instructions for Household Employers. address is needed.
In some cases, such as when you employ both Note: Where you file depends on whether or not you are
household employees and other employees, you may including a payment.
choose to report social security, Medicare, and withheld
Federal income taxes for your household employee(s) on
Form 941, Employer’s Quarterly Federal Tax Return, or Exception for exempt organizations and government entities. If
Form 943, Employer’s Annual Tax Return for Agricultural you are filing Form 940 for an exempt organization or government
Employees, instead of on Schedule H. If you choose to entity (Federal, state, local, or Indian tribal), use the following
addresses, regardless of location:
report on Form 941 or 943, you must use Form 940 (or
940-EZ) to report FUTA tax.
Return without payment: Return with payment:
Agricultural employers. File a FUTA tax return if either P.O. Box 660095
1 or 2 below applies: Ogden, UT 84201-0046 Dallas, TX 75266-0095
1. You paid cash wages of $20,000 or more to
farmworkers during any calendar quarter in 2000 or 2001 Connecticut, Delaware, District of Columbia, Illinois, Indiana,
or Kentucky, Maine, Maryland, Massachusetts, Michigan, New
2. You employed 10 or more farmworkers during at Hampshire, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia,
least some part of a day (whether or not at the same West Virginia, Wisconsin
time) during any 20 or more different weeks in 2000 or 20
or more different weeks in 2001. Return without payment: Return with payment:
P.O. Box 105887
Count wages paid to aliens admitted on a temporary Cincinnati, OH 45999-0046 Atlanta, GA 30348-5887
basis to the United States to perform farmwork, also
known as workers with “H-2(A)” visas, to see if you meet Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida,
either 1 or 2 above. However, wages paid to H-2(A) visa Georgia, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota,
workers are not subject to FUTA tax. Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico,
Indian tribal governments. Services rendered to a North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Texas,
Utah, Washington, Wyoming
federally-recognized Indian tribal government (including
any subdivision, subsidiary, or wholly-owned business Return without payment: Return with payment:
enterprise) after December 20, 2000 are exempt from P.O. Box 660095
FUTA tax (and no Form 940 or 940-EZ for 2001 is Ogden, UT 84201-0046 Dallas, TX 75266-0095
required), subject to the tribe’s compliance with
applicable state law. For procedures on amending a 2000 Puerto Rico, U.S. Virgin Islands
Form 940 or 940-EZ, see Announcement 2001-16, I.R.B. Return without payment: Return with payment:
2001-8, February 20, 2001. You can find Announcement P.O. Box 80105
2001-16 on page 715 of Internal Revenue Bulletin 2001-8 Philadelphia, PA 19255-0046 Cincinnati, OH 45280-0005
at www.irs.gov. Also see code section 3309(d).
Nonprofit organizations. Religious, educational, If the location of your legal residence, principal place of business,
charitable, etc., organizations described in section office, or agency is not listed above —
501(c)(3) and exempt from tax under section 501(a) are All Returns:
not subject to FUTA tax and are not required to file. Philadelphia, PA 19255-0046
State and local government employers. State or local
government employers are not subject to FUTA tax and
are not required to file. Credit for Contributions Paid
Amended Returns to a State Fund
You get a credit for amounts you pay to a state (including
Use a new Form 940 to amend a previously filed Form the District of Columbia, Puerto Rico, and the U.S. Virgin
940. Check the “Amended Return” box above Part I. Islands) unemployment fund by January 31, 2002 (or
Enter all amounts that should have been on the original February 11, 2002, if that is your Form 940 due date).
return, and sign the form. Attach an explanation of the Your FUTA tax will be higher if you do not pay the state
reasons for the amended return. For example, you are contributions timely. See the Part II, line 6 instructions
filing to claim credit for contributions paid to your state on page 5 if you did not pay state contributions by
unemployment fund after the due date of Form 940. File the due date of Form 940.
the amended return with the Internal Revenue Service
Center where you filed the original return. Do not mail an “Contributions” are payments that a state requires an
amended Form 940 (even if it includes a payment) to a employer to make to its unemployment fund for the
P.O. box location. payment of unemployment benefits. However,
If you were required to file Form 940 but filed Form contributions do not include:
940-EZ instead and you must correct an error, file the • Any payments deducted or deductible from your
amended return on Form 940. employees’ pay.
• Penalties, interest, or special administrative taxes not
If you are filing an amended return after June 30 to included in the contribution rate the state assigned to
claim contributions to your state’s unemployment fund you.
that you paid after the due date of Form 940, attach a • Voluntary contributions you paid to get a lower
copy of the certification from the state. This will expedite assigned rate.
the processing of the amended return. Additional credit. You may receive an additional credit
if you have a state experience rate lower than 5.4%
Where To File (.054). This applies even if your rate is different during
In the list below, find the location where your legal the year. This additional credit is the difference between
residence, principal place of business, office, or agency your actual state payments and the amount you would
is located. Send your return to the Internal Revenue have been required to pay at 5.4%.
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The total credit allowable may not be more than 5.4% Make your deposits with an authorized financial
of the total taxable FUTA wages. institution (e.g., a commercial bank that is qualified to
Special credit for successor employers. A successor accept Federal tax deposits). To avoid a possible
employer is an employer who received a unit of another penalty, do not mail deposits directly to the IRS. Records
employer’s trade or business or all or most of the of your deposits will be sent to the IRS for crediting to
property used in the trade or business of another your business accounts.
employer. Immediately after the acquisition, the Electronic deposit requirement. You must make
successor employer must employ one or more individuals electronic deposits of all depository taxes (such as
who were employed by the previous owner. employment tax, excise tax, and corporate income tax)
You may be eligible for a credit based on the state using the Electronic Federal Tax Payment System
unemployment contributions paid by the previous (EFTPS) in 2002 if:
employer. You may claim these credits if you are a • The total deposits of such taxes in 2000 were more
successor employer and acquired a business in 2001 than $200,000 or
from a previous employer who was not required to file • You were required to use EFTPS in 2001.
Form 940 (or 940-EZ) for 2001. If you are eligible to If you are required to use EFTPS and fail to do so, you
take this credit, you must file Form 940; you may not may be subject to a 10% penalty. If you are not required
use Form 940-EZ. See section 3302(e). Enter in Part II, to use EFTPS, you may participate voluntarily. To enroll
line 3, columns (a) through (i), the information of the in or get more information about EFTPS, call
previous employer as if you paid the amounts. 1-800-555-4477 or 1-800-945-8400.
If the previous employer was required to file Form 940 See section 11 in Circular E for more information.
(or 940-EZ), see successor employer on page 5. For deposits made by EFTPS to be on time, you
Depositing FUTA Tax ! must initiate the transaction at least one business
CAUTION day before the date the deposit is due.

When to deposit. Although Form 940 covers a calendar

year, you may have to make deposits of the tax before
filing the return. Generally, deposit FUTA tax quarterly if Magnetic Media and Electronic
your FUTA tax exceeds $100. Determine your FUTA tax
for each of the first three quarters by multiplying by .008 Reporting
that part of the first $7,000 of each employee’s annual You may file Form 940 electronically or by using
wages you paid during the quarter. If any part of the magnetic media. See Rev. Proc. 96-18, 1996-1 C.B. 637,
amounts paid is exempt from state unemployment tax, for the procedures and Pub. 1314 for the tape
you may be required to deposit an amount greater than specifications. You can find Rev. Proc. 96-18 on page 73
that determined using the .008 rate. For example, in of Internal Revenue Bulletin 1996-04 at www. irs. gov .
certain states, wages paid to corporate officers, certain For information on filing Form 940 electronically, visit the
payments of sick pay by unions, and certain fringe IRS Web Site at www.irs.gov .
benefits are exempt from state unemployment tax.
If your FUTA tax for any of the first three quarters of Not Liable for FUTA Tax?
2001 (plus any undeposited amount of $100 or less from If you receive Form 940 and are not liable for FUTA tax
any earlier quarter) is over $100, deposit it by the last day for 2001, write “Not Liable” across the front of the form,
of the first month after the end of the quarter. If it is $100 sign the form, and return it to the IRS.
or less, carry it to the next quarter; a deposit is not
required. If your FUTA tax for the fourth quarter (plus any Penalties and Interest
undeposited amount from any earlier quarter) is over Avoid penalties and interest by making tax deposits when
$100, deposit the entire amount by January 31, 2002. If it due, filing a correct return, and paying all taxes when
is $100 or less, you can either make a deposit or pay it due. There are penalties for late deposits, insufficient
with your Form 940 by January 31. (If you deposit it by deposits, failure to deposit using EFTPS (when required),
January 31, you may file Form 940 by February 11, and late filing unless you can show reasonable cause. If
2002.) you file late, attach an explanation to the return. There
The deposit due dates are shown in the following are also penalties for willful failure to pay tax, make
chart: returns, and for filing false or fraudulent returns.
If undeposited FUTA tax is over $100 on — Deposit it
by —

March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 30
Specific Instructions
June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 31 Employer’s name, address, calendar year, and
employer identification number (EIN). If you are not
September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . October 31 using a preaddressed Form 940, type or print your name,
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . January 31 trade name, address, calendar tax year, and EIN on the
form. Enter your name, address, calendar tax year, and
If any deposit due date falls on a Saturday, EIN here, even if you must complete Form 940-V, Form
TIP Sunday, or legal holiday, you may deposit on the 940 Payment Voucher.
next business day. If you do not have an EIN, apply for one on Form
SS-4, Application for Employer Identification Number. If
How to deposit. If you are not required to use EFTPS you do not have an EIN by the time a return is due, write
(see Electronic deposit requirement below), use Form “Applied For” and the date you applied for the number.
8109, Federal Tax Deposit Coupon, when you make Questions A through C. If you answer “Yes” to all the
each tax deposit. The IRS will send you a book of deposit questions, you may file Form 940-EZ, a simpler version
coupons when you apply for an employer identification of Form 940. If you answer “No” to any of the questions
number (EIN). Follow the instructions in the coupon book. (or you are a successor employer claiming a credit for
If you do not have Form 8109, see section 11 in state unemployment contributions paid by the prior
Circular E. employer), you must file Form 940.
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Final return. If you will not have to file Form 940 (or wages in cash or some other way, such as goods,
940-EZ) in the future, check the box on the line below lodging, food, or clothing. For items other than cash, use
question C and complete and sign the return. If you start the fair market value when paid.
paying FUTA wages again, file Form 940 (or 940-EZ).
Line 2 — Exempt payments. The amounts reported on
Third party designee. If you want to allow an employee line 2 are exempt from FUTA tax. For FUTA tax
of your business or an individual paid preparer to discuss purposes, “wages” and “employment” do not include
your 2001 Form 940 with the IRS, check the “Yes” box in every payment and every kind of service an employee
the “Third Party Designee” section of the return. Also, may perform. In general, payments excluded from wages
enter the name, phone number, and any five numbers and payments for services excepted from employment
the designee chooses as his or her personal identification are not subject to FUTA tax. Do not enter payments
number (PIN). The designation must specify an individual over $7,000 for each employee that you enter on
and may not refer to your payroll office or a tax line 3.
preparation firm.
You may deduct exempt payments from total
By checking the “Yes” box, you are authorizing the payments only if you explain them on line 2. Amounts
IRS to call the designated employee or paid preparer to that may be exempt from your state’s unemployment tax
answer any questions that may arise during the may not be exempt from FUTA tax. For example,
processing of your return. You are also authorizing the corporate officers’ wages are not exempt from FUTA
designee to: tax even though your state may exempt those wages
• Give the IRS any information that is missing from your from its unemployment tax.
return,
• Call the IRS for information about the processing of Enter payments for services such as the following on
your return or the status of your refund or payment(s), line 2. These payments also must be entered on
and line 1.
• Respond to certain IRS notices that you have shared 1. Agricultural labor if you did not meet either 1 or 2
with the designee about math errors and return under Agricultural employers on page 2 and all
preparation. The notices will not be sent to the designee. payments to H-2(A) visa workers.
You are not authorizing the designee to receive any 2. Benefit payments for sickness or injury under a
refund check, bind you to anything (including additional workers’ compensation law.
tax liability), or otherwise represent you before the IRS. If 3. Household services if you did not pay total cash
you want to expand the designee’s authorization, see wages of $1,000 or more in any calendar quarter in 2000
Pub. 947, Practice Before the IRS and Power of or 2001.
Attorney. 4. Certain family employment. (See section 3 in
Circular E.)
The designee authorization cannot be revoked. 5. Certain fishing activities. (See Pub. 595, Tax
However, the authorization will automatically expire on Highlights for Commercial Fishermen.)
the due date (without regard to extensions) for filing your 6. Noncash payments for farmwork or household
2002 Form 940 (or 940-EZ). services in a private home. (Only cash wages paid to
these workers are taxable.)
Part I — Computation of Taxable 7. Value of certain meals and lodging. (See section 5
in Circular E.)
Wages 8. Cost of group-term life insurance.
Line 1 — Total payments. Enter the total payments 9. Payments attributable to the employee’s
(before any deductions) you made during the calendar contributions to a sick-pay plan.
year for services of employees, even if the payments are 10. Employer contributions to a SIMPLE retirement
not taxable for FUTA tax. Include salaries, wages, account (other than elective salary reduction
commissions, fees, bonuses, vacation allowances, and contributions) and employer contributions to a 401(k)
amounts paid to temporary or part-time employees; the plan (if included on line 1).
value of goods, lodging, food, clothing, and noncash 11. Employer payments to an Archer MSA.
fringe benefits; contributions to a 401(k) plan, payments 12. Benefits excludable under a section 125
to an Archer MSA, payments under adoption assistance (cafeteria) plan.
programs, and contributions to SIMPLE retirement 13. Certain statutory employees. (See section 1 in
accounts (including elective salary reduction Pub. 15-A.)
contributions); section 125 (cafeteria) plan benefits; and 14. Services performed by an inmate of a penal
sick pay (including third-party sick pay if liability is institution.
transferred to the employer). 15. Employer reimbursements (including payments to a
For details on sick pay, see Pub. 15-A, Employer’s third-party) for qualified moving expenses, to the extent
Supplemental Tax Guide. Report amounts deferred such expenses would otherwise be deductible by the
under a nonqualified deferred compensation plan at the employee. (See Pub. 521, Moving Expenses.)
later of (a) when services are performed or (b) when 16. Any other exempt service or pay.
there is no substantial risk of forfeiture of the rights to the
deferred amount. For details, see Regulations section For more information, see section 15 in Circular E or
31.3306(r)(2)-1. Include tips of $20 or more in a month section 15 in Circular A, Agricultural Employer’s Tax
reported to you by your employees. Also, include Guide (Pub. 51).
payments made by a previous employer if you are
counting those payments for the $7,000 wage base as Line 3 — Payments of more than $7,000 for services.
explained under Successor employer on page 5. Enter the total of amounts over $7,000 you paid each
employee during 2001 after subtracting any exempt
Your method of payment does not determine whether payments shown on line 2. For example, you had 10
payments are wages. Thus, you may pay wages hourly, employees and paid each $9,000 during the year,
daily, weekly, monthly, or yearly. You may pay wages for including $500 of exempt payments per employee. Enter
piecework or as a percentage of profits. You may pay $15,000 on line 3, computed as follows:
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Total payments (10 x $9,000) . . . . . . . . . . . . . $90,000 Column (b). Enter the state reporting number
Less: Exempt payments (10 x $500) . . . . . . . . ($5,000)
assigned to you when you registered as an employer with
each state. Failure to enter the correct number may result
Less: Total wage base amount (10 x $7,000) . . ($70,000) in unnecessary correspondence.
Column (c). Enter the state taxable payroll on which
Amount reported on line 3 . . . . . . . . . . . . . $15,000 you must pay state unemployment taxes for each state
shown in column (a). If your experience rate is 0%, enter
Only the first $7,000 paid to each employee is the wages that would have been subject to state
subject to FUTA tax. Do not use the state wage base unemployment tax if the 0% rate had not been granted.
for this entry. The state wage base may be different Column (d). Enter the beginning and ending dates of
from the Federal wage base of $7,000. Do not include the experience rate shown in column (e).
exempt payments from line 2 in figuring the $7,000. Column (e). Enter your state experience rate — the
Successor employer. If you acquired a business rate the state assigned to you for paying your state
from an employer who was required to file Form 940 (or unemployment tax. This rate may change based on your
940-EZ), you may count the wages that employer paid to “experience” with the state unemployment fund, for
the employees who continue to work for you when you example, because of unemployment compensation paid
figure the $7,000 wage base. Include on line 3 the to your former employees. If you do not know your
payments made by the previous employer that you experience rate, contact your state unemployment office.
included on line 1. The state experience rate can be stated as a percent or
If the first employer paid $7,000 or more to the as a decimal.
employee, also include on line 3 all the wages you paid Column (f). Multiply the amount in column (c) by .054.
to that employee. If the first employer did not pay at least Column (g). Multiply the amount in column (c) by the
$7,000 to the employee, subtract what the first employer rate in column (e).
paid from $7,000. Then subtract that result from the
wages you paid to the employee, and include any result Column (h). Subtract column (g) from column (f). If
on line 3. zero or less, enter -0-. This additional credit is the
difference between 5.4% and your state experience rate.
For example, during 2001, prior employer P paid
$5,000 to employee Jones before the acquisition and Column (i). Enter the contributions actually paid to
acquirer A paid $3,000 to Jones after the acquisition. the state unemployment fund by the due date for filing
Subtracting the $5,000 from $7,000 yields $2,000. Form 940. Do not include amounts you are required to
Subtracting the $2,000 from $3,000 (wages paid by pay but have not paid by the due date (January 31 or
acquirer A to Jones) yields $1,000. Acquirer A reports February 11 as explained under When To File on page
$8,000 (total payments) on line 1 and $6,000 ($5,000 1). If you are filing Form 940 after the due date, include
paid by prior employer P and $1,000 in excess of the only payments made by the return due date, and see the
$7,000 wage base) on line 3. See section 3306(b)(1) and instructions and worksheet under Line 6 — Credit
Regulations section 31.3306(b)(1)-1(b). below. If you are claiming excess credits as payments
of state unemployment contributions, attach a copy of the
Line 5 — Total taxable wages. This is the total amount letter from your state. Do not include any penalties,
subject to FUTA tax. Use this amount in Part II to interest, or special administrative taxes (such as
compute the gross FUTA tax and the maximum credit. surcharges, employment and training taxes, excise tax,
and assessments, which are generally listed as a
Part II — Tax Due or Refund separate item on the state’s quarterly wage report) not
Line 1 — Gross FUTA tax. Multiply the total taxable included in the experience rate assigned to you.
wages from Part I, line 5, by .062. This is the maximum Line 3a — Totals. Enter the totals of columns (h)
amount of FUTA tax. and (i).
Line 2 — Maximum credit. Multiply the total taxable Line 3b — Total tentative credit. Add line 3a, columns
wages from Part I, line 5, by .054. This is the maximum (h) and (i). As noted above, column (i) includes only
credit against FUTA tax for state contributions. payments to your state unemployment fund that you
Line 3 — Computation of tentative credit. You must made by the due date for filing Form 940. Payments
complete all applicable columns to receive any credit. made after the due date are eligible for a reduced credit
Your state will provide an experience rate to you. If you and will appear on line 6 as described below.
have been assigned an experience rate of 0% or more, Line 6 — Credit. This is the credit allowable for your
but less than 5.4%, for all or part of the year, use payments to state unemployment funds. If you made no
columns (a) through (i). If you have not been assigned late state contributions, enter the smaller of the amount
any experience rate, use columns (a), (b), (c), and (i) from Part II, line 2 or line 3b. If you do not have to make
only. If you have been assigned a rate of 5.4% or higher, payments to the state, enter zero on this line.
use columns (a), (b), (c), (d), (e), and (i) only. If you were If any state contributions were made after the
assigned an experience rate for only part of the year or
the rate was changed during the year, complete a ! Form 940 due date (January 31 or February 11 as
CAUTION explained under When To File on page 1), your
separate line for each rate period. credit for late contributions is limited to 90% of the
If you need additional lines, attach a separate amount that would have been allowable as a credit if
statement with a similar format. Also, if you are a such contributions were paid on or before the Form 940
successor employer, see Special credit for successor due date.
employers, on page 3.
Column (a). Enter the two-letter abbreviation for the
state(s) to which you were required to pay contributions
(including the District of Columbia, Puerto Rico, and the
U.S. Virgin Islands).

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Only taxpayers who made late contributions should Part III — Record of Quarterly Federal
complete the worksheet below.
Unemployment Tax Liability
Complete this part only if your FUTA tax in Part II,
Worksheet for Credit Computation if Any State line 7, is over $100. To figure your FUTA tax for each
Contributions Were Paid After the Due Date for Filing quarter, multiply by .008 that part of the first $7,000 of
Form 940 each employee’s annual wages you paid during the
A. Enter the amount from Form 940,
quarter. Enter the result in the space for that quarter.
Part II, line 2 Your “Total for year” must equal your total FUTA tax
shown in Part II, line 7.
B. Enter the amount from Form 940,
Part II, line 3b, if any Record your FUTA tax based on when you pay wages,
C. Subtract line B from line A. If zero or not on when you deposit it. For example, if you pay
less, enter -0- wages on March 29, your FUTA tax on those wages is
$200, and you deposit the $200 on April 30, you would
D. Enter total contributions paid to the
state(s) after the Form 940 due date
record that $200 in the first quarter, not in the second.
E. Enter the smaller of line C or D
Example. You had two employees and paid each
employee $4,000 in the first quarter, $5,000 in the
F. Multiply line E by .90 (90%) second quarter, $5,000 in the third quarter, and $5,000 in
G. Add lines B and F the fourth quarter. (None of these payments were exempt
H. Enter the smaller of the amount on from FUTA tax.) For the first quarter, multiply .008 x
line G or A here and on Form 940, $8,000 (the amount paid to both employees), and enter
Part II, line 6 $64 in the space for the first quarter. For the second
quarter, multiply .008 only by $6,000 ($3,000 for each
employee—the amount remaining to reach the $7,000
Example of late state contributions. You paid maximum amount subject to FUTA tax for each
$1,500 of state contributions by the Form 940 due date employee), and enter $48 in the space for the second
and $1,000 after that date. Your maximum credit on Form quarter. Because you paid each employee more than
940, Part II, line 2 is $2,000, and your tentative credit on $7,000 by the end of the second quarter, enter zero in
line 3b is $1,500. The maximum credit less the tentative the space for the third and fourth quarters. Enter $112 in
credit is $500. If you had paid the $1,000 state the “Total for year” space.
contributions on time, you would have been allowed an
additional credit of only $500, not the full $1,000.
Therefore, the credit for the late contributions is limited to Privacy Act and Paperwork Reduction Act Notice.
90% of $500. You complete the worksheet as follows: We ask for the information on this form to carry out the
Internal Revenue laws of the United States. We need it to
figure and collect the right amount of tax. Chapter 23,
A. Enter the amount from Form 940, Federal Unemployment Tax Act, of Subtitle C,
Part II, line 2 $2,000 Employment Taxes, of the Internal Revenue Code
imposes a tax on employers with respect to employees.
B. Enter the amount from Form 940, This form is used to determine the amount of the tax that
Part II, line 3b, if any 1,500
you owe. Section 6011 requires you to provide the
C. Subtract line B from line A. If zero or requested information if you are liable for FUTA tax under
less, enter -0- 500 section 3301. Section 6109 requires you to provide your
D. Enter total contributions paid to the employer identification number (EIN).
state(s) after the Form 940 due date 1,000 Routine uses of this information include giving it to the
E. Enter the smaller of line C or D 500 Department of Justice for civil and criminal litigation, and
F. Multiply line E by .90 (90%) 450 to cities, states, and the District of Columbia for use in
1,950 administering their tax laws. If you fail to provide this
G. Add lines B and F information in a timely manner, you may be subject to
H. Enter the smaller of the amount on penalties and interest.
line G or A here and on Form 940, You are not required to provide the information
Part II, line 6 1,950
requested on a form that is subject to the Paperwork
Reduction Act unless the form displays a valid OMB
Enter $1,950 from line H of the worksheet on Form control number. Books or records relating to a form or its
940, Part II, line 6. This is the allowable credit for your instructions must be retained as long as their contents
contributions to the state unemployment fund. may become material in the administration of any Internal
Line 9 — Balance due. Make your check or money Revenue law. Generally, tax returns and return
order payable to the “United States Treasury.” Write information are confidential, as required by section 6103.
your EIN, “Form 940,” and “2001” on your check or The time needed to complete and file this form will
money order. Enter the amount of the payment on Form vary depending on individual circumstances. The
940-V at the bottom of Form 940. If the employer estimated average time is: Recordkeeping—13 hr., 45
information is not preprinted on the payment voucher, min.; Learning about the law or the form—1 hr., 17
enter the requested information. (Make certain that the min.; Preparing and sending the form to the IRS —
entity information above line A is properly completed.) 1 hr., 49 min.
If the amount on line 9 is under $1, you do not have to If you have comments concerning the accuracy of
pay it. For payments over $100, see Depositing FUTA these time estimates or suggestions for making this form
Tax on page 3. simpler, we would be happy to hear from you. You can
Line 10 — Overpayment. If the amount on line 10 is write to the Tax Forms Committee, Western Area
under $1, we will send a refund or apply it to your next Distribution Center, Rancho Cordova, CA 95743-0001.
return only on written request. Do not send the tax form to this office. Instead, see
Where To File on page 2.

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