 Hello in this lecture, we will define form 940 according to fundamental accounting principles. Wow 22nd edition the definition of form 940 is Iris form used to report an employer's federal unemployment tax Futa on an annual filing basis when we're thinking about the form 940 We're talking about a payroll tax when we think about the payroll tax We're usually thinking about the FICA tax social security and Medicare This is going to be the federal unemployment tax and it's only going to be an employer tax meaning It's not being taken out of the employee wages. It will be based however on the employee wages But it's paid by the employer only the form is going to be done annually rather than quarterly So the 941s reporting the Medicare and the Social Security and the federal unemployment Will be on the quarterly 941s. This will be at the end of the year the 940 It's usually a lot less because the unemployment tax the federal unemployment tax generally is far less in amount The form looks something like this. This is a 2016 form from iris.gov We've got the information for the business up top in essence the calculation of the tax liability would be That we're gonna have the employee wages multiplied times the tax rate However, there's a cap on the wages something around 7,000 so every employee up to that cap very low cap So just about every employee reaches that cap if they haven't been employed for a significant amount of the year And then we're gonna take that multiply times the rate that will give us the liability We're gonna compare that liability to what has actually been paid So remember this is similar to the form 1040 for an individual in that we've already made the payments The iris expects payments to be made throughout the year and this form is really just confirming the payments as would a form 1040 For an individual a form 1040 for an individual However is almost never gonna be exactly correct and it usually results in a refund if all we have our w2 Wages because the withholdings are usually bigger than the amount of the actual tax That's how the system is set up the food attacks. However is more of a flat tax rate We don't have that the progressive system therefore it should be exact by the time we get to the end of the year We should just be filing this form to confirm the fact that we have this amount of liability for the year And that's how much we have paid during the year However, if that's not the case, then we'll have a refund or an amount due at this point in time off the payroll