Form 940 is an information-heavy document. The form requires several important figures from throughout the year, including the total payments made to all employees, payments exempt from FUTA tax, and FUTA liability for each quarter. To complete this form, employers will need robust payroll and accounting datasets from which to draw. Unfortunately, most small businesses don’t have this resource, which can make filing Form 940 very time consuming.
Software tools from Advanced Micro Solutions can significantly improve your form 940 filing process. Whether you need help tracking and calculating payroll, calculating your FUTA liability, or electronically filing form 940, our products can save you time and money.
What is Form 940?
Form 940, also known as the Annual Federal Unemployment Tax Return, is used to report FUTA tax. This tax, along with state unemployment tax systems, provides unemployment compensation funds to workers who have lost their jobs. FUTA tax is not deducted from employee wages, which makes it a unique accounting process. For more information about Form 940, see the IRS’s provided instructions.
Form 940 is due January 31st of the year following the calendar year for which the tax is paid and reported. The IRS encourages employers to file Form 940 electronically. It is important to remember that, while the annual Federal Unemployment Tax Return is due January 31st, you will likely need to deposit your FUTA tax before filing the return. Once your cumulative tax is $500 or more, you will need to make your deposit. This makes the calculation and accounting for IRS Form 940 an ongoing process, one in which the employer must stay on top of deposits.
Understanding FUTA Tax Filing
The Federal Unemployment Tax applies to the first $7,000 paid to each employee during the calendar year (after subtracting exempt payments). There are two reasons why an employer might have to pay this tax. They are:
- If you paid wages of $1,500 or more to employees in any calendar quarter
- If you had one or more employees for at least some part of a day in any 20 or more different weeks during the calendar year. This includes all full-time, part-time, and temporary employees, but it does not include business partners.
The FUTA tax is set at 6 percent, which means you will need to report 6 percent of the first $7,000 for each employee. The calculation itself is simple, but keeping track of employees can be difficult, especially if you small business is expanding and contracting in size. This is where support from Advanced Micro Solutions can help.
How AMS Payroll can Help with Form 940
The figures reported on Form 940 are calculated throughout the year, often each quarter. Businesses will need to record this information, as well as other data related to payroll, for use during annual tax season. More small businesses don’t have the software tools to do this, but AMS provides an accessible and user-friendly option.
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If you’re struggling to complete and file Form 940, AMS Payroll ($134) may be the solution you need. This software tool calculates payroll, payroll taxes, and can assist in filing Form 940. Once payroll information is recorded, the data is stored within the software for easy access. Employers can then use this information when calculating quarterly FUTA liability, as well as when filing Form 940 during annual tax season. What’s more, AMS Payroll allows users to electronically file Form 940, as well as forms 941 and 944. Federal tax and wage reporting has never been easier.