Form 940 (2014): Employer’s Federal Unemployment
Tax Return
Form 940 for the 2014 tax year is used to report employer responsibilities under the Federal
Unemployment Tax Act and calculate annual federal unemployment tax liability. Employers must reconcile FUTA tax rate calculations, quarterly tax deposits, and state unemployment tax credits before filing with the Internal Revenue Service.
Verify FUTA Filing Requirement and Wage Thresholds
Confirm whether your business is required to file Form 940 for 2014. If you paid $1,500 or more in wages in any quarter of 2013 or 2014, or employed one or more people for at least part of a day in 20 or more weeks in either year, you must file. These requirements apply regardless of federal taxes withheld for other payroll forms.
Confirm Applicable FUTA Wage Base and Tax Rate
Verify that FUTA wages are capped at the $7,000 base per employee for 2014. Apply the statutory FUTA tax rate of 6.0 percent before credits, as required under the Federal
Unemployment Tax Act, and ensure no wage deduction errors were made for FUTA-covered compensation.
Gather State Unemployment Tax Information and
Experience Ratings
Collect state unemployment insurance rate notices for each jurisdiction where employees worked in 2014. State unemployment tax systems determine the credit allowed against FUTA liability and must be accurately reported on Schedule A (Form 940) for multi-state employers.
Determine Multi-State and Credit Reduction Status
Identify whether your business operated in more than one state during 2014 or in a credit reduction jurisdiction. Schedule A (Form 940) must list each state account number for employers, experience rate, and any federal credit reduction percentage for affected jurisdictions.
Calculate Gross FUTA Tax Liability
Compute gross federal unemployment tax by applying the FUTA tax rate to total taxable FUTA wages. Include wages paid to covered employees only and exclude exempt categories such as qualifying family members, agricultural labor under threshold limits, or domestic service below household employer thresholds.
Reconcile Quarterly FUTA Tax Deposits
Review all quarterly FUTA tax deposits made during 2014 through the Electronic Federal Tax
Payment System or Federal EFTPS system. Deposits are required when cumulative liability exceeds $500 in any quarter, and quarterly FUTA tax payments must be accurately reflected on
Form 940.
Apply State Unemployment Tax Credits
Subtract allowable credits for state unemployment taxes from gross FUTA liability. The maximum credit is 5.4 percent, reduced if the employer paid wages in a credit reduction state or jurisdiction with unpaid unemployment compensation loans.
Review Special Employer Categories
Confirm whether special filing rules apply based on your business type. Successor Employers must follow specific wage carryover rules, Indian tribal governments may have different requirements for participating in the unemployment fund, and employers in Puerto Rico must follow distinct credit reduction reporting rules.
Household and Agricultural Employer Considerations
Household employers who paid $1,000 or more in cash wages in any quarter must generally report FUTA using Schedule H (Form 1040) instead of Form 940. Agricultural employers must file Form 940 if they paid $20,000 or more in farmworker wages or employed ten or more workers for 20 weeks.
Complete and Review Form Sections and Schedules
Ensure all required sections of Form 940 are complete, including Part 5 and Part 6 for reconciliation and tax due calculations. Attach Schedule A (Form 940) if needed, and confirm no conflicting information appears on other employment tax forms, such as Form 943 or Form 944.
Signature, Authorization, and Filing Method
The authorized individual must sign and date Form 940 before submission. If using a reporting service, confirm that Form 8453-EMP or Reporting Agent Authorization is properly executed, or that a Power of Attorney is on file if applicable.
Payment, Refunds, and Filing Format
If tax is due, submit payment via EFTPS or an approved electronic method. Employers eligible for refunds may request payment via direct deposit. If filing electronically, confirm the Fillable
Form 940 version is correct for the 2014 tax year.
Common Mistakes to Avoid
- Confusing FUTA reporting with other payroll forms: FUTA tax is reported only on
Form 940 and is separate from Forms 941, 943, and 944, which cover income tax withholding and employment taxes.
- Using incorrect credit reduction percentages: Credit reduction rates vary by
jurisdiction and year, and errors on Schedule A can result in underpayment and IRS penalties.
- Failing to make required quarterly deposits: Employers must deposit FUTA taxes
when cumulative liability exceeds $500, even if no payment is ultimately due with the annual return.
- Omitting Schedule A for multi-state operations: Employers operating in more than
one state must complete Schedule A accurately to reconcile state unemployment taxes and federal credits.
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