hotel a MilanoPreparing Your Tax Return(s) and InformationReturns
Employment Taxes

Form 940 Employer's Annual Federal Unemployment Tax Return

New for 2000

The Federal Unemployment Tax Act (FUTA), with state unemploymentsystems, provides for payments of unemployment compensation to workers who have lost theirjobs. Most employers pay both a Federal and a state unemployment tax. Only the employerpays FUTA tax; it is not deducted from the employee's wages. For information, see the Instructions forForm 940.

Use the following three tests to determine whether you must pay FUTAtax. Each test applies to a different category of employee, and each is independent of theothers. If a test describes your situation, you are subject to FUTA tax on the wages youpay to employees in that category during the current calendar year.

1. General test
You are subject to FUTA tax on the wages you pay employees who are not farmworkers orhousehold workers if in the current or preceding calendar year:

ERROR MSGa. You paid wages of $1,500 or more in any calendar quarter in 1998 or 1999 or
Bern Hotel de calidad b. You had one or more employees for at least some of a day in any 20 or more different weeks in 1998 or 20 or more different weeks in 1999.

2. Household employees test

luxury hotels in ChaniaYou are subject to FUTA tax only if you paid cash wages totaling $1,000 or more (for all household employees) in any calendar quarter of the current or preceding year. A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter.

3. Farmworkers test

You are subject to FUTA tax on the wages you pay to farmworkers if:
a. You paid cash wages of $20,000 or more to farmworkers during any calendar quarter in 1998 or 1999 or
b. You employed 10 or more farmworkers during at least some part of a day (whether or not at the same time) during any 20 or more different weeks in 1998 or 20 or more different weeks in 1999.

Computing FUTA tax. For 1998 and 1999, the FUTA tax rate is 6.2%.The tax applies to the first $7,000 amount you pay each employee as wages during the year.The $7,000 is the Federal wage base. Your state wage base may be different. Generally, youcan take a credit against your FUTA tax for amounts you paid into state unemploymentfunds. This credit cannot be more than 5.4% of taxable wages. If you are entitled to themaximum 5.4% credit, the FUTA tax rate after the credit is .8%.

See the Instructions forForm 940 for more information on:

• Depositing FUTA tax
• Table 4 When to Deposit FUTA Taxes
• Reporting FUTA tax.
• Form 940-EZ requirements.
• Where To File

Important References 

Publication 15                    Circular E, Employer's Tax Guide
Form 940                            Employer's Annua Federal Unemployment Tax Return
Instructionsfor Form 940
Form 940 EZ