How do I complete the worksheet of Form 940?
278 views | Last modified 9/26/2023 3:49:35 AM EST | Added by TaxBandits Team

The Worksheet of Form 940 is required to calculate your credit for Line 10 on the form. The worksheet takes you step by step through the process of figuring your credit under the following two conditions:

• If any of the wages you paid were excluded from state unemployment tax, OR
• If you have paid the state unemployment taxes late (after the Form 940 due date)

For the worksheet calculation, you need the following:

• Taxable FUTA wages (Value you entered in line 7 of Part 2).
• Taxable state unemployment wages.
• Experience rates assigned to you by the states where you paid wages. 
• Amount of state unemployment taxes you paid on time. You should also include the state unemployment taxes you paid on nonemployees who were treated as employees by your state unemployment agency.
• State unemployment taxes you paid after the due date for filing 940.

Steps to fill the Worksheet

Line 1 - Maximum allowable credit

Multiply Taxable FUTA wages (line 7 of 940) with 0.054.

Line 1 = Form 940, line 7 x 0.054

 

Line 2 - Credit for timely state unemployment tax payments

Enter the amount of state unemployment taxes you paid on time.

• If Line 2 is greater than or equal to Line 1, do not proceed further. And, leave the Line 10 of Form 940 blank.
• If Line 2 is less than Line 1, continue with this worksheet.

Line 3 - Additional credit 

Enter the value in this line depending on the answer to the below question:

             Were ALL of your assigned experience rates 5.4% or more?

• If your answer is YES, enter zero on line 3 and proceed to line 4.
• If your answer is NO, calculate the values for Line 3 based on the format below:

Line 3 = (0.054 - your assigned experience rate) x Taxable state unemployment wages at assigned experience rate

 

Note: You must only list out states for which your assigned experience rate was lesser than 5.4%.

Line 4 - Subtotal

Sum up Line 2 & Line 3 and enter the resultant value.

Line 4 = Line 2 + Line 3

 

• If line 4 is greater than or equal to line 1, do not proceed further. You can leave Line 10 of Form 940 empty.
• If line 4 is less than line 1, move to line 5.

Line 5 - Credit for paying state unemployment taxes late

5a - What is your remaining allowable credit? 

Enter the difference between Line 1 and Line 4. 

5a = line 1 – line 4

 

5b - How much state unemployment tax did you pay late?

Enter the state unemployment taxes you paid after the original due date.

5c - Which is smaller, line 5a or line 5b?

Enter the smallest value between 5a or 5b.

5d - Your allowable credit for paying state unemployment taxes late

Multiply 5c with 0.900 and enter the resultant value.

5d = Line 5c x 0.900

 

Line 6 - Your FUTA credit

Sum up line 4 & line 5d and enter the resultant value.

Line 6 = Line 4 + Line 5d

 

• If line 6 is greater than or equal to line 1, do not proceed further. You can leave Form 940, line 10, blank.
• If line 6 is lesser than line 1, continue to line 7.

Line 7 - Your adjustment

Enter the difference between Line 1 and Line 6.

Line 7 = Line 1 - Line 6

 

This adjustment value is to be entered on Line 10 of Form 940.