If you answer Yes to questions A-C and No to question D, you may file Form 940-EZ. If you answer No to questions A, B or C or if you answer Yes to question D, or if you are a successor employer claiming a credit for state unemployment contributions made by the prior employer, you must file Form 940.

If you answer Yes to question D, the IRS requires that you file Form 940 because only that form can compute the additional FUTA tax you might owe as the result of the credit reduction the IRS imposed on New York state in 2005.

Enter the total payments (before any deductions) you made during the calendar year for services of employees, even if the payments are not taxable for FUTA tax. Includes salary, wages, commissions, fees bonuses, vacation allowances, and amounts paid to temporary or part-time employees; the value of goods, lodging, food, clothing and noncash fringe benefits; employer contributions to a 401(k) plan, payments to a Health Savings Account (HSA) or Archer MSA, payments under adoption assistance programs, and employer contributions to SIMPLE retirement accounts (including elective salary reduction contributions); section 125 (cafeteria) plan benefits; and sick pay (including third-party sick pay if liability is transferred to the employer).

QuickBooks: QuickBooks adds together payroll items with one of these tax tracking types:

• Compensation
• Reported Tips
• Non-qual. Plan Distr
• Fringe Benefits
• Other Moving Expenses
• 401(k)
• 403(b)
• 408(k)(6) SEP
• Elective 457(b)
• 501(c)(18)(D)
• Qual. Moving Expense
• Co. Paid Med Savings
• SIMPLE IRA
• Adoption Benefits
• Taxable Grp Trm Life
• SCorp Pd Med Premium
• Health Savings Acct

Run a Payroll Item Listing report to see the tax tracking types assigned to your payroll item in QuickBooks.

Run a Payroll Summary report for the Form 940 filing period and note the amounts for the payroll items with the matching tax tracking types.

The amounts reported on line 2 are exempt from FUTA tax. For FUTA tax purposes, “wages” and “employment” do not include every payment and every kind of service an employee may perform. In general, payments excluded from wags and payments for services excepted from employment are not subject to FUTA tax. Do not enter payments over $7,000 for each employee that you enter on line 3. For a complete list of included payments, see 2005 Instructions for Form 940 (IRS publication 13660I) available from the IRS Website at www.irs.gov.

QuickBooks calculates the total on this line by adding together payroll items that constitute exempt payments. Exempt payments include QuickBooks payroll items with any of the following tax tracking types:

• Dependent Care FSA, Co. Paid Dep. Care, Qual. Moving Expense, 125 Medicare, Premium Only Plan, Taxable Grp Trm Life, SCorp Pd Med Premium, and Health Savings Acct.
  and
• Any payroll item you set to calculate before FUTA witholding.

You can tell if a payroll item is set to calculate before FUTA withholding if you checked "Federal Unemployment" on the Taxes screen of the payroll, then you set that payroll item to calculate before FUTA withholding. QuickBoooks includes the amounts for that payroll item in Line 2.

Run a Payroll Item Listing report to see the tax tracking types assigned to your payroll item in QuickBooks.

Run a Payroll Summary report for the Form 940 filing period and note the amounts for the payroll items with the matching tax tracking types.

Enter the total of amounts over $7,000 you paid to each employee during 2005 after subtracting any exempt payments shown on line 2. Do not use the state wage base for this entry. The state wage base may be different from the federal wage base of $7,000. Do not include any exempt payments from line 2 in figuring the $7,000.

Successor employer: If you acquired a business from an employer that was required to file Form 940, you may count the wages that employer paid to the employees who continue to work for you when you figure the $7,000 wage base. Include on line 3 the payments made by the previous employer that you included on line 1. If the first employer paid $7,000 or more to the employee, also include on line 3 all the wages you paid to that employee. If the first employer did not pay at least $7,000 to the employee, subtract what the first employer paid from $7,000. Then subtract that result from the wages you paid to the employee, and include any result on line 3.

Line 3 equals line 1 minus the total FUTA wage base.

The total FUTA wage base includes the first $7,000 you paid to each employee. If an employee received less than the $7,000 federal wage limit during the year, the entire amount is included in Line 3. Exempt payments are not included in total payments.

Run a Payroll Item Detail report for the Form 940 filing period. Scroll to the appropriate payroll item.

To determine the amount for Line 3, subtract the wage limit amount from the amount on Line 1, Total Payments.

Line 4 equals Line 2 plus Line 3.

Line 4 equals Line 2 plus Line 3.

This is the amount subject to FUTA tax. Use this amount in Part II to compute the gross FUTA tax and the maximum credit.

Line 5 equals Line 1 minus Line 4.

(NOTE: This Line applies only to companies with employees in New York because New York is the only credit reduction state for 2005.) Enter the amount of wages included on line 5 subject to the unemployment compensation laws of New York. The wages shown on line 6 cannot exceed the total taxable wages shown on line 5. If no wages are subject to these laws, enter -0- on line 6. Multiply the wages by the rate shown. The amount of this adjustment increases your FUTA tax by reducing the credit otherwise allowable against the FUTA tax for contributions made to state unemployment funds. However, the increase cannot be more than the credit otherwise allowable.

(NOTE: This Line applies only to companies with employees in New York because New York is the only credit reduction state for 2005.) Line 6 displays the amount on Line 5 that is subject to the unemployment compensation laws of the state of New York multiplied by .006.

Line 6 is an additional tax amount resulting from the New York state credit reduction imposed on New York by the IRS in 2005. This amount is not the total taxable amount for the state of New York, as the state wage limit differs from the federal wage limit. This line cannot exceed the total taxable wages shown on Line 5. If no wages are subject to unemployment compensation laws, 0 (zero) will be displayed on Line 6.

Run a Payroll Item Detail report to determine amounts over the $7,000 wage limit. Scroll to the appropriate payroll item. The Wage Base column shows the amount subject to FUTA up to the $7,000 limit.

To determine the amount for Line 6, subtract the wage limit amount from Line 1, Total Payments for those wages subject to the unemployment compensation law for the state of New York.

Because there are no other credit reduction states, transfer the number from Line 6 to Line 7.

Line 6 and Line 7 should be the same.

Enter the amount of your payment. If the employer information is not preprinted on the payment voucher, enter the requested information. Make certain that the entity information above line A is also properly completed.

The total balance due for the tax year. This amount should match Part II, Line 9 of Form 940.

Run a Payroll Liability Balances report to see the total liability balance for FUTA.

Note: If you have additional tax resulting from a New York state credit reduction (Form 940, Part I, Line 6), the total balance due on Form 940-V may not match the total balance in the report.

Multiply the total taxable wages from Part I, line 5 by .062. This is the maximum amount of FUTA tax.

Line 5, Part 1, multiplied by the rate specified in that line.

Multiply the total taxable wages from Part I, line 5, by .054. This is the maximum credit against FUTA tax for state contributions.

Line 5, Part 1, multiplied by the rate specified in that line.

You must complete all applicable columns to receive any credit. Your state will provide an experience rate to you. If you have been assigned an experience rate of zero percent or more, but less than 5.4%, for all or part of the year, use columns (a) through (i). If you have NOT been assigned any experience rate, use columns (a), (b), (c) and (i) only. If you were assigned an experience rate for only part of the year or the rate was changed during the year, complete a separate line for each rate period.

Enter the two-letter postal abbreviation for the state(s) to which you were required to pay contributions (including District of Columbia, Puerto Rico and the U.S. Virgin Islands).

The two-letter abbreviation of the state to which you made unemployment contributions as defined by the QuickBooks SUI payroll item for the applicable state.

Enter the state reporting number assigned to you when you registered as an employer with each state. Failure to enter the correct number may result in unnecessary correspondence.

The state reporting number as defined by the QuickBooks SUI payroll item for the applicable state.

Go to the Lists menu and click the Payroll Items List. The state reporting number is in the Account ID column.

Enter the state taxable payroll on which you must pay the state unemployment taxes for each state shown in column (a). If your experience rate is zero percent, enter the wages that would have been subject to state unemployment tax if the zero percent rate had not been granted.

The sum of all QuickBooks payroll items taxable to the applicable state up to the state's wage limit for the specified filing period. Each state can have different taxable payroll items. Check with your accountant or payroll advisor if you’re not sure which payroll items would be taxable for your state.

Run a Payroll Item Listing report to see the tax tracking types assigned to your payroll item in QuickBooks.

Run a Payroll Summary report for the Form 940 filing period and note the amounts for the payroll items with the matching tax tracking types.

Enter the beginning and ending dates of the experience rate shown in column (a).

The start and end date of each quarter that taxable payroll was paid in a particular state. The From and To columns display the dates for each quarter within the tax year reported.

Enter your state experience rate – the rate the state assigned you for paying your state unemployment tax. This rate may change based on your “experience” with the state unemployment fund. If you do not know your experience rate, contact your state unemployment office. The state experience rate can be stated as a percentage or as a decimal point.

The rate as defined in the QuickBooks state unemployment insurance payroll item for the applicable state, which can be found in the Payroll Item Listing report.

Run a Payroll Item Listing report for the Form 940 filing period.

Multiply the amount in column (c) by .054.

(c) multiplied by the rate displayed in column (f).

Multiply the amount in column (c) by the rate in column (e).

Column (c) multiplied by column (e).

Subtract column (g) from column (f). If zero or less, enter zero. This additional credit is the difference between 5.4% and your state experience rate.

Column (f) minus column (g) or 0 (if g is less than 0 (zero)).

Enter the contributions you actually paid to the state unemployment fund by the due date for filing your Form 940. Do not include amounts you are required to pay but have not paid by the Form 940 due date. If you are filing Form 940 after the due date, include only payments made by the return due date, and see instructions under Part II, line 4. If you are claiming excess credits as payments of state unemployment contributions, attach a copy of the letter from your state. Do not include any penalties, interest, or special administrative taxes (such as surcharges, employment and training taxes, excise tax, and assessments, which are generally listed as a separate item on the state’s quarterly wage report) not included in the experience rate assigned to you.

Contributions actually paid to the state (that is, the sum of SUI taxes paid). QuickBooks totals all payroll liability item checks created for a particular state unemployment insurance item.

Run a Payroll Item Detail report for the Form 940 filing period. Scroll to the appropriate payroll item. With this report, you can identify any liability checks created for a particular state unemployment insurance payroll item.

Enter the totals of columns (h) and (i)

Totals for columns (h) and (i)

Add line 3a, columns (h) and (i). As noted above, column (i) includes only payments to your state unemployment fund that you made by the due date for filing Form 940. Payments made after the due date are eligible for a reduced credit and will appear on line 4 as described below.

The sum of Line 3a, columns (h) and (i).

This is the credit allowable for your payments to state unemployment funds. If you made no late state contributions, enter the smaller of the amount from Part II, line 2 or line 3b. If you do not have to make payments to the state, enter zero on this line. (CAUTION: If any state contributions were made after the Form 940 due date, your credit for late contributions is limited to 90% of the amount that would have been allowable as a credit if such contributions were paid on or before the Form 940 due date.)

The smaller amount from Part II Line 2 or Line 3b; or the amount from the worksheet in the government instructions. That worksheet can be found in 2005 Instructions for Form 940, IRS publication 13660I available from www.irs.gov.

Enter the amount from Part I, line 7.

The amount from Part 1, Line 7.

Line 4 minus Line 5. This is the allowable credit for contributions to the state.

Line 4 minus Line 5.

Subtract Line 6 from Line 1.

Part II, Line 1 minus Line 6. Note: If the result is over $500.00, complete Part III.

Total FUTA tax deposited for the year, including any overpayment applied from a prior year.

The sum of FUTA taxes from your payroll liability checks and any prior payments for the year. You will have to manually adjust this number, if you want to include any prior payments.

Run a Payroll Item Detail report for the Form 940 filing period. Scroll to the appropriate payroll item. With this report, you can identify any liability checks created for FUTA tax.

If the amount on line 9 is under $1, you do not have to pay it.

QuickBooks fills in this field if Line 7 minus Line 8 is greater than 0. However, according to IRS rules, you only have to make a payment if the amount is $1 or greater. If the amount QuickBooks fills in is less than $1, you don’t have to make a payment.

If the amount on line 10 is over $1, the IRS will send a refund or apply it to your next return with a written request.

If Line 8 minus Line 7 is a positive number, you have overpaid your taxes for this quarter, and QuickBooks fills in this field. Otherwise, QuickBooks leaves it blank.

To figure your FUTA tax for the first three quarters, multiply by .008 that part of the first $7,000 of each employee’s annual wages you paid during the quarter. (However, if any part of the wages subject to FUTA is exempt from state unemployment tax, you may have to figure more than the tax using the .008 rate). Enter the result in the columns for the first through third quarters.

To figure your FUTA for the fourth quarter (including any tax from Part I, line 7), complete Form 940 through Part II, line 7. Enter the amount from Part II, line 7 in the “total for year” column. Subtract the sum of the amounts shown in columns one through three from the amounts shown in “total for year” column and enter the result in the column for the fourth quarter. Record your FUTA tax liability based on when you pay wages, not on when you make a tax deposit.

The sum of FUTA taxes for each quarter, totaled from taxes accrued on paychecks, any liability adjustments, and any year-to-date information.

Per government instructions, QuickBooks populates these fields only if the liability in Part II, Line 7 is greater than $500.

Run a Payroll Item Detail report for the Form 940 filing period. Scroll to the appropriate payroll item. With this report, you can identify any liability checks for FUTA tax.

Sign, write in your title and date your form.

QuickBooks pulls the information for the “title” line from the “Payroll Tax Information” section of the Company Information window. If there is no data there, QuickBooks will leave this line blank.