The previous article discussed the legal basis for the federal unemployment (FUTA) tax, as well as the tax rate and the credits that affect the tax rate. This article will focus on how to complete Form 940: Employer’s Annual Federal Unemployment (FUTA) Tax Return.
How Do State Unemployment Taxes Affect the Federal Form 940?
The Federal Unemployment Tax Act (FUTA) established a joint state-federal program for providing partial wage replacement payments to workers who involuntarily lose their jobs. Therefore, an employer must provide information on Form 940 regarding the payment of state unemployment taxes (SUTA).
On Line 1 of Form 940 an employer must indicate whether it was required to pay SUTA in only one state or multiple states. (See Exhibit A below.) If the employer was required to pay unemployment in more than one state, it must check the box on Line 1b and check the boxes for each state to which it paid SUTA taxes in Part 1 of Form 940, Schedule A.
