| The Federal unemployment tax is used by the Federal | | | | without a reasonable cause, IRS can impose penalties |
| government to pay compensation towards | | | | or interest for such neglect. So if you are filing late, |
| unemployment money paid to workers losing their | | | | you must attach an explanation to your return. There |
| jobs. FUTA is payable by the employers only, so any | | | | are penalties for filing false returns, fraudulent returns |
| employee is not required to pay anything towards | | | | and for failure to keep records. |
| such tax. The tax is based on wages of each | | | | The due date for filing Form 940 is January 31. |
| employee. Usually FUTA ends up with the 0.8 per | | | | However, if you have deposited all the tax whenever |
| cent on first $7000 of each employee’s salary. | | | | due, you can file the form before February 12. As |
| So the maximum tax liability for the employer per | | | | the tax liability is for every quarter, you need to pay |
| employee can be $56.00. However if an employee is | | | | the taxes quarterly. If your quarterly liability is less |
| paid only $6000 during a year, the cost to the | | | | than $500, you can carry forward that amount for the |
| employer under FUTA will be $48.00. | | | | next quarter. Please do not send checks directly to |
| Even though the tax rate under FUTA is 6.2 per cent, | | | | IRS. You need to deposit this amount with the |
| employers who pay timely state unemployment tax | | | | Federal Reserve Bank in your area or with an |
| can qualify to receive a credit of 5.4 per cent out of | | | | authorized financial institution. |
| this. So the effective tax rate comes to 0.8 per | | | | There are certain employments which are exempt |
| cent. If you pay penalties or interest on state taxes, | | | | under FUTA. These include certain family |
| that cannot be included to claim credit. FUTA tax is | | | | employments, certain fishing activities, non-cash |
| paid annually. You should file Form 940 to pay FUTA | | | | payments made to farm workers or household |
| tax. If your total tax payable exceeds $500, you | | | | services, payments made for sickness or injury to |
| should make the payments in advance. If your tax | | | | workers, payments for group term life insurance etc. |
| payable exceeds $500, IRS will levy a penalty as well | | | | IRS is very strict and aggressive on 940 taxes and |
| as interest. | | | | you are not discharged even in a bankruptcy. It has |
| FUTA tax is payable even though you have household | | | | extensive powers to collect these taxes. IRS can |
| employees. If you pay wages in cash of $1000 or | | | | impose severe penalties and make the owner or |
| more, in any calendar quarter, you must file form 940 | | | | individual personally responsible for paying the tax. |
| and pay FUTA tax. However if you have only | | | | IRS can also take action against any other person |
| household employees, you can pay this tax on your | | | | who they think responsible for the failure. The |
| individual tax return. There is no need to make | | | | account receivables and other property can be seized |
| separate payments under FUTA tax. | | | | by IRS, destroying the business prospective for the |
| If you are an agricultural employer, and you paid cash | | | | employers. |
| wages of $20,000 or more to workers in the farm and | | | | Its better to process the payments under FUTA with |
| during a calendar quarter in a year, it is compulsory for | | | | the payroll, so that the responsibility under FUTA can |
| you to file form 940 and pay the taxes. | | | | be discharged quickly and with a little cost and tension. |
| If you file your return late or delay paying your taxes, | | | | |