- [Instructor] In addition to all of the other
tax liability forms you send out,
you also have to pay FUTA taxes,
federal unemployment taxes.
This is done through the form 940 filing.
You pay a deposit for these taxes quarterly,
but at the end of the year
you're going to have to file your form 940
and that reconciles all of your quarterly deposits
with your liability.
Let's walk through a 940 filing, shall we?
So this is the 940 for 2017.
It's updated every year,
but again, it's pretty consistent from year to year.
So there's nothing earth shattering
that should change in most cases.
At the top you're going to fill in your identification number,
your EIN number, your name, and your address.
From there, you'll then come down and fill in
the information about this particular return.
Now in most cases,
the first line that you're going to care about here
is line three,
total payments to all employees.
Okay?
So you need to figure out the total wages
you've paid out to everybody throughout the year.
Sometimes you'll have some funds that are exempt
from FUTA taxes,
but this isn't particularly common.
'Kay?
So in most cases you'll simply have
the total amount that you've paid to all employees
and then the total amount of payments
in excess of 7,000 dollars paid to each employee.
From there, you're going to come up with your subtotal
based on lines four and five.
Alright?
And that, after taking line three minus line six,
you'll come up with your total taxable FUTA wages.
Remember, when we deal with SUTA,
the state unemployment taxes
or the state unemployment insurance,
you had some sort of a base wage.
Might be 10,000, might be 15,000, might be 20,000 dollars.
You paid taxes on the first 10, 15, 20,000 dollars
of each employee to the state.
In the case of the federal government,
for the year 2017 you pay FUTA on the first 7,000 dollars
paid to each employee.
That is your total taxable FUTA wages here in line seven.
Alright, now from there you're going to
determine what your FUTA tax is.
Notice to do this,
you're going to take your line seven FUTA taxable wages
and multiply by .006,
60 basis points.
If you recall, SUTA unemployment tax levels
are anywhere from, say,
maybe for a really efficient business,
half a percent or 1%
all the way up to six, seven, eight, 9%.
So the FUTA taxes are actually quite modest by comparison,
60 basis points.
Not a particularly big deal for most businesses
compared to SUTA,
but you're still going to have to pay it.
So you have to go through multiply your line seven
by 60 basis points.
Then you'll determine any of your adjustments
in part three.
In most cases you won't have
a significant level of adjustments.
And then, you'll determine your total FUTA tax.
SUTA taxes for a small business might be
10,000 dollars or more per year.
FUTA taxes are a small fraction of that.
In many cases, for my company as an example,
with say 20 employees,
we frequently have FUTA taxes of less
than 1,000 dollars a year.
In some years, particularly early on,
it might be less than 500 dollars.
You'll need to go through and reconcile
the amount that you paid in FUTA taxes
each quarter versus your FUTA tax liability
to determine in line 14 whether you have a balance due
or whether or not the government owes you money.
Have you overpaid or underpaid?
To do that you're going to look at the difference between
line 13, all of your FUTA tax deposits for the year.
That is the quarterly payment, each quarter,
added up for the year
versus your FUTA liabilities based on line 12.
Once you determine if you have overpayment
or underpayment you can decide whether
you're going to have to send a check
or whether you're going to be getting a refund or a credit
on your next return.
From there in Part Five,
just like when you're dealing with a 941
on a quarterly basis,
you're going to have to reconcile your total FUTA liability
versus your quarterly liabilities.
The key here to minimizing the difficulty
is make sure that you've got, on hand before you start,
clean records on how much you paid FUTA each quarter
and then what your total payroll was each quarter.
This will make your life much easier.
Once you get done with all that,
you sign your form and you send it off
to the appropriate address
based on whether you get a refund or
whether you owe money.