Form 940 (2017) – Employer’s Annual Federal Unemployment (FUTA) Tax Return Checklist
Purpose
Form 940 reports annual FUTA tax liability for employers. For 2017, the $7,000 employee wage threshold remains unchanged, and the 0.6% net FUTA rate applies after state unemployment tax credit adjustments. Multi-state employers and those in credit reduction states must complete Schedule A (Form 940).
Filing Requirements Checklist
Step 1: Verify Your Employer Identification Number
Enter your employer identification number (EIN) in the designated field at the top of the form. If you have not received your EIN by the filing due date, enter “Applied For” in the EIN space. This notation allows the IRS to recognize your filing as timely while your EIN application is being processed.
Step 2: Select Your Return Type
Check the applicable return type boxes at the top right corner of the form. Options include amended return, successor employer, no payments to employees in 2017, or final return due to business closure. Check all boxes that accurately reflect your 2017 circumstances. Only mark the boxes that apply to your specific situation.
Step 3: Determine State Unemployment Tax Filing Requirements
If you paid wages in only one state, enter the two-letter state abbreviation on line 1a. If you are a multi-state employer who paid wages in more than one state, check the box on line 1b and complete Schedule A (Form 940) for each state where you paid wages subject to state unemployment tax.
Step 4: Check for Credit Reduction State Status
For 2017, California and the U.S. Virgin Islands were designated as credit reduction states, each with a 2.1% credit reduction rate. If you paid wages subject to unemployment tax laws in either jurisdiction, check the box on line 2 and complete Schedule A (Form 940) to report adjusted credit calculations.
Step 5: Enter Total Payments to All Employees
Report all payments made to employees during 2017 on line 3. Use your Form 941 quarterly wage records or equivalent payroll documentation. Include all remuneration, whether or not it is subject to FUTA tax. This includes salaries, wages, commissions, fees, bonuses, vacation allowances, and amounts paid to full-time, part-time, or temporary employees.
Step 6: Calculate Exempt Payments
On line 4, enter payments exempt from FUTA tax by category. Check the applicable boxes and itemize amounts for fringe benefits, group-term life insurance exceeding $50,000, retirement or pension contributions, dependent care assistance up to $5,000 per employee, and other statutory exemptions. Total all exempt payments and enter the sum on line 4.
Step 7: Compute Excess Wages
Calculate the total wages paid to each employee that exceeded $7,000 during 2017. Enter this amount on line 5. For employees who earned more than $7,000, include only the portion exceeding the $7,000 threshold. For example, if an employee earned $10,000, enter $3,000 as excess wages for that employee.
Step 8: Determine Taxable FUTA Wages
Add lines 4 and 5 to calculate your subtotal on line 6. Subtract line 6 from line 3 to determine your total taxable FUTA wages, which you enter on line 7. This amount represents the wages subject to FUTA tax after removing exempt payments and excess wages.
Step 9: Calculate FUTA Tax Before Adjustments
Multiply line 7 by 0.006 to calculate your FUTA tax before adjustments. Enter this amount on line 8. The 0.6% rate represents the net FUTA tax rate after applying the maximum 5.4% credit for state unemployment taxes.
Step 10: Determine Adjustment Eligibility
Complete Part 3 to calculate any necessary adjustments. If all taxable FUTA wages were excluded from state unemployment tax, multiply line 7 by 0.054 and enter the result on line 9. If some wages were excluded from state unemployment tax or if you paid state unemployment tax late, complete the worksheet provided on pages 10-11 of the 2017 Instructions for Form 940. Enter the amount from line 7 of that worksheet on line 10.
Step 11: Apply Credit Reduction Amounts
If you paid wages in California or the U.S. Virgin Islands during 2017, enter the total credit reduction amount from Schedule A (Form 940) on line 11. Leave this line blank if you did not pay wages in these credit reduction jurisdictions.
Step 12: Calculate Total FUTA Tax and Payment Due
Add lines 8, 9, 10, and 11 to determine your total FUTA tax after adjustments. Enter this amount on line 12. On line 13, enter the total deposits you made in 2017, including any overpayments from the prior year.
If line 12 exceeds line 13, enter the balance due on line 14. If the balance owing is more than $500, you must deposit your tax by electronic funds transfer. If the balance is $500 or less, you may pay with your Form 940 submission using Form 940-V.
If line 13 exceeds line 12, enter the overpayment on line 15. Choose whether to apply the overpayment to your next return or receive a refund by checking the appropriate box.
Step 13: Complete Quarterly Liability Breakdown
Fill out Part 5, lines 16a through 16d, only if your total FUTA tax after adjustments on line 12 is more than $500. If line 12 is $500 or less, leave Part 5 blank and proceed to Part 6.
Enter your FUTA tax liability, not your deposits, for each quarter. Report first quarter liability on line 16a, second quarter on line 16b, third quarter on line 16c, and fourth quarter on line 16d. The sum of lines 16a through 16d must equal line 12.
Step 14: Authorize Third-Party Designee
In Part 6, indicate whether you want to allow a third-party designee to discuss your return with the IRS. If yes, provide the designee’s name, phone number, and select a five-digit personal identification number (PIN). If not, check the “No” box and proceed to Part 7.
Step 15: Sign and Date the Form
Both pages of Form 940 must be completed and signed under penalties of perjury. An authorized officer, owner, or other authorized person must sign the form, print their name and title, enter the date, and provide a daytime phone number. If a paid preparer completed the form, they must also sign in the designated section.
2017-Specific Requirements
Wage Base Threshold
The $7,000 annual wage threshold for FUTA tax exclusion remains in effect for 2017. No indexing adjustment applies to this threshold, which has been unchanged since 1983.
Payment Voucher Instructions
If you are making a payment of $500 or less with your Form 940, complete Form 940-V, Payment Voucher. Do not staple Form 940-V to your Form 940 or to your payment. Detach the voucher and send it with your payment and Form 940 to the appropriate IRS address listed in the instructions. Do not file Form 940-V if you pay by electronic funds transfer, credit card, or debit card.
Credit Reduction Adjustments
For 2017, credit reduction adjustments apply only to wages paid in California and the U.S. Virgin Islands. The credit reduction rate for both jurisdictions is 2.1%. Use Schedule A (Form 940) to calculate the credit reduction amount, which increases your total FUTA tax liability.
Filing Deadline
The due date for filing Form 940 for 2017 is January 31, 2018. However, if you deposited all your FUTA tax when it was due throughout the year, you may file Form 940 by February 12, 2018.
Deposit Requirements
Deposit your FUTA tax quarterly if your cumulative tax liability exceeds $500. If your FUTA tax is $500 or less in a quarter, carry it forward to the next quarter. Continue carrying forward until your cumulative tax exceeds $500, then deposit by the last day of the month following the end of that quarter.
For the fourth quarter, if your total FUTA tax for the quarter plus any undeposited amounts from earlier quarters exceeds $500, deposit the entire amount by January 31, 2018. If the total is $500 or less, you may either deposit it or pay it with Form 940 by January 31, 2018.
Electronic Payment Options
All federal tax deposits must be made by electronic funds transfer. You can use the Electronic Federal Tax Payment System (EFTPS), arrange for same-day wire payment through your financial institution, or, if filing electronically, use electronic funds withdrawal. For balances due of $500 or less, you may also pay by credit or debit card; however, a processing fee applies.
Final Reminders
Ensure all information is accurate and complete before submitting your Form 940. Attach Schedule A (Form 940) if you are a multi-state employer or paid wages in California or the U.S. Virgin Islands. Keep copies of all forms and supporting documentation for your records. If you need to make corrections after filing, use an amended Form 940 for 2017 and check box “a” at the top of the form.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
