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Form 940 CPA discusses 2013 FUTA Preparation | Schedule A of Form 940 | example of Form 940 preparation | amending Form 940

Form 940 CPA Payroll CPA

Gary Bode, CPA: I hope this Form 940 preparation example helps. (910) 399-2705.

Form 940: CPA example of 2013 FUTA calculations. Hi I’m Gary Bode, a CPA with a virtual office to help your company wherever it is. I believe in making clients as self-reliant in payroll administration as they wish. And then give support if required.

I think Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, is confusing in an IRS sort of way:

  • You only prepare it once a year, so it’s hard to get experience with it.
  • The IRS has some specialized terminology that doesn’t make sense to non-CPA accountant types.
  • Schedule A is sort of new and it still complicates Form 940 preparation this year.
  • The rates recently changed. Some parts of Form 940 may not apply to you.

Here’s a filled out 2013 FUTA IRS Form 940 example prepared per the specs below.

Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, basics

  • Form 940 uses a calendar year. Only include wages paid in 2013.
  • Only the first $7,000 of gross wages per employee per calender year are taxable.
  • Some types of wages are exempt from tax. See the list on Line 4 of the 2013 FUTA example tax form.
  • Federal FUTA tax is 0.6%. So the maximum federal FUTA tax is $42 per year (0.6% x $7,000) per employee per calendar year.
  • There could be additional FUTA depending on the State you live in. Read below.

The 940 Header

No real issues here. If you want to amend your Form 940 later, because you mis-calculated the FUTA liability, just check the amended check box in the top right box.

Part 1 of Form 940

Since this is an easy example, we’re only using one State, but, we’re assuming it is a Credit Reduction state. That means you had to prepare Schedule A for Form 940. Schedule A of Form 940 is pretty obvious, and we’re just going to carry over an imaginary figure from it, to, Form 940.

Part 2 of Form 940

We’ll use two employees:

  • Employee A received $28,000 in 2013 which includes $1,000 of retirement contributions.
  • Employee B received $17,000 in 2013.

Form 940 Calculations

  • Line 3 is $45,000 (28,000 + 17,000). Total payments to all employees.
  • Line 4 is $1,000 (the retirement contributions). Payments exempt from FUTA tax. Note the other exemptions.
  • Line 5 is $30,000 [(28,000 – 1,000 – 7,000) + (17,000 – 7,000)]. Total of payments made to each employee in excess of $7,000.
  • Line 6 is $31,000 (30,000 + 1,000). Subtotal.
  • Line 7 is $14,000 (35,000 – 31,000). Total taxable FUTA wages. Notice there were two employees in 2012 and the maximum taxable FUTA wage in 2012 is $7,000. $7,000 x 2 = $14,000.
  • Line 8 is $84.00 (.006 x 14,000). FUTA tax before adjustments.

Part 3 of Form 940

Our simple example only uses Line 11 which carries over a figure from Schedule A for taxpayers living in a State requiring a credit reduction.

Part 4 of Form 940

  • Line 12 is $168 (84 + 84).
  • Line 13 is $0. Our company had no obligation to deposit FUTA funds in 2013, so they didn’t.
  • Line 14 is $168.

Page 2

Part 5 of Form 940

  • Line 16a is $143. Why? The first $7,000 of gross wages for each employee did not incur FUTA. Only Employee A had gross wages exceeding $7,000 in the first Quarter of 2013.
  • Line 16b is $25. I just made up these figures, but I decided that Employee B’s wages didn’t exceed $7,000 until sometime during the 2nd calendar quarter.
  • Line 16c and 16d. Typically these calendar Quarters incur less FUTA tax than the first two Quarters.
  • Line 17 is $168. Note this matches Line 14 above.

Part 6 of Form 940

Usually clients want us to be their Form 940 FUTA third-party designee. But this return was self prepared. The person signing it becomes the IRS contact.

940-V

This is the best part, a payment coupon. Note the IRS prefers you use EFTPS and 940-V will eventually disappear.

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13 comments to Form 940 CPA discusses 2013 FUTA Preparation | Schedule A of Form 940 | example of Form 940 preparation | amending Form 940

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