As a business owner, you're probably aware of the importance of filing taxes accurately and on time. One crucial tax form you need to file annually is the 940 Form, also known as the Employer's Annual Federal Unemployment (FUTA) Tax Return. In this article, we'll provide you with 5 essential tips for filing the 940 Form for 2017.
The 940 Form is used to report your business's federal unemployment tax liability, which is a vital component of the unemployment insurance system. This system provides financial assistance to workers who have lost their jobs through no fault of their own. As an employer, it's your responsibility to contribute to this system by paying FUTA taxes. Failure to file the 940 Form accurately and on time can result in penalties, fines, and even interest on the amount owed.
Tip 1: Understand the Filing Requirements
Before you start filing the 940 Form, it's essential to understand the requirements. You must file the 940 Form if you had employees and paid wages subject to FUTA tax during the calendar year. This includes:
- You paid $1,500 or more in wages in any calendar quarter.
- You had one or more employees who worked at least some part of a day in any 20 or more different weeks in the calendar year.
If you're unsure about whether you need to file the 940 Form, consult with a tax professional or contact the IRS directly.
Who is Exempt from Filing the 940 Form?
Some businesses are exempt from filing the 940 Form, including:
- Federal, state, and local government agencies
- Non-profit organizations exempt from income tax under Section 501(c)(3) of the Internal Revenue Code
- Indian tribes and certain tribal organizations
Tip 2: Gather Required Documents
To file the 940 Form accurately, you'll need to gather the following documents:
- Form W-3, Transmittal of Wage and Tax Statements
- Form W-2, Wage and Tax Statement
- Form 941, Employer's Quarterly Federal Tax Return
- Records of FUTA tax deposits made during the calendar year
Make sure you have all the necessary documents before starting the filing process.
What is the FUTA Tax Rate?
The FUTA tax rate is 6% of the first $7,000 of wages paid to each employee during the calendar year. However, most employers receive a credit of up to 5.4% for state unemployment taxes, which reduces the effective FUTA tax rate to 0.6%.
Tip 3: File Electronically
The IRS encourages employers to file the 940 Form electronically. Electronic filing is faster, more accurate, and more convenient than paper filing. You can use the IRS's Electronic Federal Tax Payment System (EFTPS) to file the 940 Form.
What are the Benefits of Electronic Filing?
Electronic filing offers several benefits, including:
- Faster processing and refunds
- Reduced errors and rejected returns
- Increased security and confidentiality
- Ability to schedule payments and avoid penalties
Tip 4: Meet the Filing Deadline
The deadline for filing the 940 Form is January 31st of each year. If you fail to meet this deadline, you may be subject to penalties and interest on the amount owed.
What Happens if I Miss the Filing Deadline?
If you miss the filing deadline, you may be subject to:
- Penalties of up to 5% of the unpaid tax for each month or part of a month
- Interest on the amount owed
- Loss of credit for state unemployment taxes
Don't risk missing the filing deadline. Make sure to file the 940 Form on time to avoid these consequences.
Tip 5: Seek Professional Help
If you're unsure about how to file the 940 Form or need help with the filing process, consider seeking professional help. A tax professional can guide you through the process and ensure that your return is accurate and complete.
What are the Benefits of Seeking Professional Help?
Seeking professional help offers several benefits, including:
- Accurate and complete returns
- Reduced risk of errors and penalties
- Increased confidence and peace of mind
- Ability to focus on your business while leaving the tax filing to a professional
By following these 5 tips, you can ensure that your 940 Form is filed accurately and on time. Remember to understand the filing requirements, gather required documents, file electronically, meet the filing deadline, and seek professional help if needed.
What is the purpose of the 940 Form?
+The 940 Form is used to report a business's federal unemployment tax liability, which is a vital component of the unemployment insurance system.
Who needs to file the 940 Form?
+Businesses that had employees and paid wages subject to FUTA tax during the calendar year need to file the 940 Form.
What is the FUTA tax rate?
+The FUTA tax rate is 6% of the first $7,000 of wages paid to each employee during the calendar year.