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Wilmington CPA discusses IRS Tax Form 940: Unemployment Tax (FUTA)

Wilmington NC CPA Firm: IRS Form 940 (FUTA)

Gary Bode, CPA: if you run into trouble preparing IRS tax Form 940, please consider giving us a call at (910) 399-2705 for a free initial consult.

The federal unemployment tax, FUTA, is calculated on IRS tax Form 940.  Due annually on January 31st, the rate is 0.8% on the first $7000 of gross wages, per employee, for the calendar year.  So, a maximum of $56 per employee, if you paid all the company’s NC unemployment tax on time.  We consider Form 940 tax preparation as part of our payroll accounting services, even though it deals with unemployment tax.

Once your FUTA liability exceeds $200 for the year, you’re required to deposit it through EFPTS or your bank.  So, the company has to keep a running tab to be in compliance, despite there being only an annual report required.

Tax Form 940, and the rates, haven’t changed in years.  Tax preparation looks complex but really isn’t, if you know the following:

  • Company’s gross wages, which have to tie with: a) the four quarterly federal employment Form 941(s) and the four quarterly NC ESC (Employment Security Commission) unemployment tax returns (NCUI 101).
  • FUTA tax payments paid for the year already.
  • Exempt wages.
  • The amount of excludable wages (over $7000 to each employee).

This derives the amount of taxable wages.  So, while this amount is easy to calculate the reverse way IE up to $7000 of wages per employee, the IRS just makes it seem harder.

We’re a Wilmington NC CPA firm offering payroll accounting services, including Form 940 tax preparation.  If you’d like a free initial consult, please consider calling us at (910) 399-2705.  We are a Wilmington NC CPA accounting firm serving NC counties: New Hanover, Brunswick, and Pender.

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