Figuring out how to file Form 940 can sometimes be a little tricky. Below I’ve laid out the different parts and steps to completing the form.
Part 1 of the 940:
In Part 1a of form 940 you enter your state abbreviation(s). Part 1b if you are filing for multiple states you will complete Schedule A for Form 940. Part 2 you must also file out Schedule A for Form 940 for wages subject to the credit reduction. So, as you see this quickly gets complicated and luckily, we all have Quickbooks out there to help us.
Part 2 of the 940:
Now part of the 940 calculates your FUTA tax before any adjustments made. For this section you need to gather you total payments to employees, amounts that are exempt from FUTA, and total payments exceeding $7,000 to all employees for the year. The calculation done by Quickbooks proceeds to provide these amounts for you.
Part 3 of the 940:
Part 3 of the 940 calculates any adjustments for state unemployment tax considering credit reductions. Credit reductions can get very complicated but with Quickbooks there’s no need for you to calculate this part.
Part 4 of the 940:
Provides the balance due or payments not made from the previous year. Keep in mind that there are severe penalties applied by States for failing to pay this on time and interest is included.
Part 5 of the 940:
This section states your tax owed per quarter if it’s more than $500. Quickbooks again calculates your amount due and if you need pay on a quarterly basis.
To make sure your calculating your tax correctly to avoid penalties and interest Quickbooks online offers a completely free payroll trial to prepare Form 940.
Part 6 of the 940:
Part 6 provides info on person who may represent you in this matter. You aren’t required to have a paid preparer for the 940 but if you do the information of that individual will be included in this section. This is a critical part on how to file Form 940 for 2016 & 2017 to avoid significant penalties.
Part 7 of the 940:
In part 7 you will provide your signature which can be done electronically through Quickbooks. By signing you are ensuring that all of the information have provided is correct and accurate.
Keep in mind that Quickbooks Payroll Online is excellent for preparing and submitted Form 940 and we highly recommend it.