Form 940 CPA discusses 2012 FUTA Preparation | Schedule A of Form 940 | example of Form 940 preparation | amending Form 940

Form 940: CPA example of 2012 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-accountant types.
• Schedule A was new last year 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 2012 Form 940 Preparation Example filled out to the specs 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 2012 which includes $1,000 of retirement contributions.
• Employee B received $17,000 in 2012.

Calculations

• Line 3 is $45,000 (28,000 + 17,000).
• Line 4 is $1,000 (the retirement contributions).
• Line 5 is $30,000 [(28,000 – 1,000 – 7,000) + (17,000 – 7,000)].
• Line 6 is $31,000 (30,000 + 1,000).
• Line 7 is $14,000 (35,000 – 31,000). 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)

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 2012, so they didn’t.
• Line 14 is $168.

Page 2

Part 5 of Form 940

• Line 16a is $10. 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 2012.
• Line 16b is $30. 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 more 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.

Find me on Google+