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IRS Issues Updated 940 Form for 2011

The IRS has issued an updated Form 940 to reflect two changes this year with FUTA, the federal unemployment program.

In Part 1 of Form 940, employers must now mark whether they live in a credit reduction state, one of 21 states that borrowed from FUTA to help fund their state’s unemployment. States that have not repaid their loans have had their FUTA credit reduced by varying amounts. Employers in these states will need to fill out Schedule A to figure the additional FUTA tax that is due. What is Schedule A (Form 940)? It’s a supplement that you attach to Form 940, and it helps employer determine their annual FUTA tax.

In Part II of the 940, employers are now asked to break down their FUTA wages for the first and second halves of the year. This is due to the expiration of the 0.2% FUTA surtax on July 1, which changed the effective FUTA tax rate from 0.8% to 0.6%. For more background, read the article “FUTA Surtax Set to Expire, Adding Confusion for Payroll Managers.”

The annual FUTA return is due January 31, 2012.

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