How do you fill out Form 940, Federal Unemployment Tax Act (FUTA), Schedule A in EasyACCT?
How to fill out Form 940, Schedule A
- Go to Print Reports, Tax Reports, Select Form 940, Input Year to Process, Print.
- In the input screen, select the checkbox on line 1b or line 2 to make the Schedule A button appear.
- The Schedule A allows the input for any of the Credit Reduction State wages.
- Wages paid in each state will automatically populate the Schedule A if you've set up State Unemployment Tax Act (SUTA) in the Wage/Withholding tab for each employee.
- The FUTA wages subject to credit reduction are limited to $7,000 per employee.
- The total FUTA wages subject to credit reduction on Schedule A should match the total taxable FUTA wages on line 7.
- Employees who work in multiple states have FUTA wages prorated per state on the first $7,000 of their wages.
- For example, employee 1 works in Kansas and Missouri, and earns half of their wages in each state in January, for a total of $10,000.
- Their FUTA taxable wages will be $3,500 for each state to total $7,000 in taxable FUTA wages.
- Employee 2 works in Kansas and Missouri, and earns 25% of their wages in Kansas, and 75% in Missouri in January, for a total of $10,000.
- Their FUTA taxable wages will be $1,750 for Kansas and $5,250 for Missouri, to total $7,000 in taxable FUTA wages.
- Select Next to view 9–16, then select Print to view the Form 940.
- Any credit reduction amounts calculated from Schedule A will go to the Form 940, page 1, Line 11.
- Adjustments to the General Ledger are made through journal entries.
What are Credit Reduction States?
- A state that hasn't repaid money it borrowed from the Federal Government to pay Unemployment benefits is a "Credit Reduction State."
- The Department of Labor determines these states each year, and the amount of the reduction (which adds additional FUTA tax) for each state.
- If an employer pays wages that are subject to the Unemployment Tax laws of a Credit Reduction State, that employer must pay additional Federal Unemployment Tax when filing Form 940.
- Wages paid that are subject to the Unemployment Compensation laws of a Credit Reduction State reduce the regular 0.054 credit.
- The Credit Reduction amount is then calculated on Schedule A and added to the total liability for Form 940.
- For more information about Form 940, see the IRS's Instructions for Form 940.
- For the current year credit reduction states go to FUTA Credit Reductions.
- FUTA tax liability for the quarter = the first $7,000 of each employee's annual wages paid during the quarter, multiplied by 0.006.
- The 0.06% tax rate is based on receiving the maximum credit against FUTA taxes.
- The maximum credit is allowed if all State Unemployment Tax was paid by the due date of Form 940, or if no State Unemployment Tax was due during the calendar year due to your state experience rate.
- This FUTA rate is an employer paid tax in the EasyACCT tax tables, and is calculated on the Payroll Journal.