 In this presentation, we will take a look at Form 940, which is the Employers' Annual Federal Unemployment or FUTTA tax return. Here's an example of the form. This comes from the IRS website, which you can find at IRS.gov. We got the 1040 currently for 2017. It has the same information up top that we see in the 941, which will include the EIN number, the Employer Identification number, name, trade, and address. Note over here, however, even though we have a similar looking box, it's not the same as we see on the 941s, because this is a yearly return rather than a quarterly return. So this box includes stuff. If we had to amend the return or some other special circumstances, like it's like the last return or something like that, then we would select the appropriate items here, but this isn't a quarterly return. That's the thing we really want to remember here. They sound very similar, of course, one because of the numbers and two because it's a payroll tax form, but the 941 is actually the quarterly returns. The 940 is the yearly return. So it also seems kind of funny that the 940, the thing we do at the end of the year, has a number that's before the 941s that we do on a quarterly base. Note that they're not related in many different ways. The 940 at the end of the year, in other words, it would make sense for us to think that the IRS would want us to make a 940 return, 941 return quarterly for four quarters and then re-sum up that data again in the yearly return in this form the 941. That's not what is happening, however. There are actually two different types of taxes that we are dealing with for the 941s and the 940s. In other words, really what's happening for the 941s is it's reporting our main taxes, meaning it's reporting FIT, federal income tax, social security for the employer and employee side, and Medicare for the employer and employee side. So my guess is the reason that we need to record that on a quarterly basis rather than on a yearly basis is because of its significance. We're recording the main taxes there. The 940, on the other hand, which we only have to report at the end of the year, is only reporting the FUTTA tax, federal unemployment tax, which is a much smaller tax. So really what's happening here is the IRS is saying, hey, we're going to give you some pity here and not make you report this on a quarterly basis, but instead just on a yearly basis. But we do want to see the quarterly taxes for the FIT, social security and Medicare. So in other words, this one lines up closer to what we think of and know of with our personal taxes like the 1040 that we have to file at the end of the year. That is also an information return that we would basically say, hey, this is how much we owe at the end of the year. We should have already paid it and we file that one time. That's similar to the 940 here that we do for the federal unemployment tax. If we go down to the calculations then, we got our registered data up here. This is going to be our data from our register. We will use then to fill out this form 940. We're here in part one. So the first one says, if you had to pay state unemployment tax in one state only, we're going to pick the Nevada, just pick a state here. Note here that you might think, well, why do I need a state? Because it's a federal tax, aren't all states equal when considering federal taxes? But note that the FUTA taxes, the law got kind of mixed up with the state taxes, meaning the FUTA tax is lower if you paid SUTA tax. In other words, the state would have to have a SUTA tax law to pay the SUTA to get the lower rate for FUTA, which most states did, and therefore in essence, we'll have a lower rate of FUTA. So when you think of FUTA, we really are applying a lower rate, pretty low rate, but it's only applicable if we're paying SUTA taxes generally, and that would only be applicable if the state had a SUTA tax, which because of that requirement, most states do. So we're just going to pick a state here. That's why we need a state. And the B says, if you had to pay state unemployment tax in more than one state, then we'd have to make sure that again, we kind of paid the SUTA tax to calculate the FUTA at the lower rate. And then two says, if you paid wages in state that is subject to credit reduction, so we're not going to deal with that here either. So then we have the total payments to all employees. This is going to come from our earnings record. So we have the 241-206 from the earnings record. It's not going to differ than in other words, we may have different types of earnings wages if we're talking about FIT earnings or if we're talking about OASDI earnings, it could differ. We're just going to take the total earnings typically here for the FUTA earnings. Next thing says, payments exempt from FUTA tax. In our example, we don't have any exempt payments from FUTA tax. Line 5 says, total of payments made to each employee in excess of 7,000. This number can be confusing because it's often not the number that we have calculated when we're calculating our payroll calculations. In other words, we didn't really calculate the amount that would be over the 7,000 for each employee and therefore not to be used within the calculation for the FUTA taxes. We calculated the number that would be included. In other words, the wages for FUTA. So then we can use that to calculate what the FUTA tax would be. So we would already know the FUTA wages and we would actually know what the FUTA tax was based on those FUTA wages, which would be the FUTA wages times the FUTA rate. So what we're going to do is actually skip down to what we know and then we'll back into this number. What we know is this number, line 7, total taxable FUTA wages is 28,000. That means that this calculation, these wages were the FUTA wages for all employees who reached that cap of 7,000. So this is calculated as you keep on increasing the FUTA wages until you get to that cap and then you stop calculating FUTA wages. So note the FUTA wages will be much different than total earnings. It'll be much lower. Most employees will reach that cap. The only reason they would not is typically or the main reasons they would not is if they were laid off sometime in the year and never reached 7,000 or if they were hired toward the end of the year. Other than that, most employees will reach the cap. In our example, we had four employees and they all reached the cap of 7,000. So we just have 7,000 times four employees, 28,000 is our wages. Then we're going to multiply that times the FUTA rate and that's where we already have the FUTA calculation here. So in other words, we know this number already, then we can back into this number. If this is the FUTA wages and these are the total wages, then all the wages above the FUTA cap is just the difference between the two or 241 206 minus 28,000. So that's 213 206. So then we'll kind of back into this number 213 206. So the IRS wants to is going to read it this way. They're going to say that we have 241 206 minus 213 206 to get the FUTA wages that we're actually going to use. And we calculated it this way. We basically said, hey, we already we already found the FUTA wages and we didn't know how much was over FUTA. So we know these two numbers 240 241 206 minus 28,000. And that gives us the 213 206. Once we have that then line eight says FUTA tax before adjustments, we're going to take that line seven times 0.006. So we'll just take that calculation 28,000 times 0.006. That's the 168. And we would already have we can already probably have that on our worksheet. And note that this will be a worksheet, not part of the register. The register shows the net pay, the gross pay to the net pay. And this is an employer tax only. And therefore we need a worksheet that would probably be included to the register calculation. So there's our 168. If we continue down to part B, or part three, there's nothing in part three, it says if all the taxable FUTA wages you paid were excluded from state unemployment tax multiply line seven by 0.054. In other words, if there's an issue where we didn't place state SUTA tax, we would have to pay more FUTA tax because FUTA is tied to SUTA. So if we paid the state tax, then typically we have this nice low FUTA rate. If on the other hand, for whatever reason, we did not pay SUTA tax, then we're probably going to have to pay more for FUTA. We're not going to deal with that. In our example, we have then line 12 FUTA tax after adjustments, which will remain the same at 168. Then we have the deposit amount. And just like the 941s, we have to make sure that we know the difference between this amount, the liability calculation, and this amount, which will be the amount we actually paid. They're going to be the same, but a number, but they're coming from different sources. This is us recalculating FUTA, telling the IRS, hey, this is our FUTA liability. Then we should have already paid it in a similar way that we already have paid our taxes when we report our 1040 individual tax return at the end of the year. In this case, however, it should be exact because it's a flat tax, easy to calculate, should already be paid. This, in other words, is just an information return, not a return that's going to tell us, hey, this is how much we owe and write a check for. So we're going to get that from our payroll register. And in this case, our journal entries. So we're looking at our journal entries. This is when we paid payroll. We paid 17,000, 17315, and then 16,348 for these two journal entries. And we're picking up just the FUTA portion in this case, which is this portion. So it's going to be a smaller amount, of course. So it's the 12538 and the 4262. If we were to pull out the trusty calculator and add that up 125.38 plus 42.62, we get 168. So that is our 168. And that's going to be the amount that we'll go here on our FUTA return. It will match, it will be the same. And therefore, we won't owe anything, but we want to make sure that if we get audited, if they double check on that, that this number is our payments, that we can go back and see if they have been paid. We can also see if they have cleared, if they cleared the bank and therefore know if the IRS has deposited those amounts.