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Home > FMS Policies and Procedures CA > Pay and File Taxes on Behalf of Consumers > IRS Form 940: Employer's Annual Federal Unemployment (FUTA) Tax Return and Payment

IRS Form 940: Employer's Annual Federal Unemployment (FUTA) Tax Return and Payment

Policy: 

In accordance with Section 3504 of the Internal Revenue Code, Revenue Procedure 70-6 as modified by Proposed regulations REG-137036-08-1 and in accordance with Revenue Procedure 2013-39, F/EA Files Form 940 annually and in aggregate on behalf of all consumers in the participant direction program. F/EA uses their separate agent Employer Identification Number (EIN) to file Form 940.  Per IRS regulation, F/EA deposits employer Federal Unemployment Tax quarterly on behalf of all consumers. 

F/EA Accountant utilizes reconciliation processes to ensure that the Payroll Department filed and paid estimated, quarterly 940 taxes accurately, timely and in accordance with existing regulation. On a monthly basis, F/EA reconciles 940 reports to debits for 940 payments from Program Operating Account.
 
Documentation showing payments of Federal Unemployment Tax made on behalf of consumers is made available to Program Administrator and consumers upon request.


 
Procedure: 

Reconcile and Verify 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, Payment

Performed Quarterly
 
Federal Unemployment Tax (FUTA) payments are made quarterly by the Payroll Department. F/EA Accountant (or assigned staff) verifies that payments were made timely and accurately using the below process.
 
  1.  Per IRS Guidance, the Payroll Department makes one aggregate payment per quarter for Federal Unemployment Tax on behalf of all consumers represented by F/EA
  2. <<Insert Process Used to determine estimate FUTA deposit amounts by employer and then deposit FUTA in aggregate using the F/EA's separate FEIN).
  3. A breakdown of the quarterly payment, the EFTPS Batch Provider Payment Inquiry, is submitted to F/EA Accountant by the Payroll Department after payment to IRS is completed
  4. F/EA Accountant (or assigned staff) collects EFTPS Batch Provider Payment Inquiry
  5. Open “Quarterly Tax Reconciliation” saved at <<File Path>>
  6. Complete the Quarterly Tax Reconciliation by entering values next to the labels for each document
  7.  Insert FUTA liability amount from Payroll Department Report
  8.  Enter amount on Line 1 of Quarterly Reconciliation document
  9. Review payment amount on EFTPS Batch Provider Payment Inquiry
  10. Enter amount on Line 1 of Quarterly Reconciliation document
  11. Review “Settlement Date” on EFTPS Payment Batch Inquiry
  12. Verify that “Settlement Date” for 940 Payment occurred on or before the 940 Payment Due Date
  13. Enter Settlement Date on Quarterly Tax Reconciliation document
  • Quarter 1 is due by April 30
  • Quarter 2 is due by July 31
  • Quarter 3 is due by October 31
  • Quarter 4 is due by January 31

 14.  Review the “Variance” column of the Quarterly Tax Reconciliation document

  • Any value greater than or less than “0” in the “Variance” column indicates discrepancy
  • Any discrepancies must be researched and resolved
  • Report discrepancies to reporting agent as applicable
  • Payroll Department will make a supplemental payment or adjust an overpayment as necessary

 15.  If no discrepancies identified, F/EA Accountant prints Quarterly Tax Reconciliation document

 16.  F/EA Accountant signs and dates Quarterly Tax Reconciliation document next to “Prepared By” 

 17.  F/EA Accountant provides Quarterly Tax Reconciliation document and supporting documents to <<Staff Title>>

 18.  <<Staff Title>> signs and dates Quarterly Tax Reconciliation document next to “Verified By”

 19.  <<Staff Title>> scans all documents and stores them at <<File Path>>

 20.  Signed reconciliation sheets are stored for a minimum of 7 years.

 
Reconcile and Verify 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, Payment
Performed Annually
 
Per IRS Regulation, Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, is filed annually and in aggregate on behalf of all consumers represented by F/EA. Annually when Form 940 is filed with the IRS by the reporting agent, F/EA Accountant verifies form 940 for accuracy and to ensure it was filed timely.
 
  1. <<Insert process to collect applicable payroll data and complete Form 940 per Sample>>     
  2. At year-end, form 940 is compared to FUTA payments and liabilities for the calendar year  <<Insert process to verify and reconcile Form 940>>
  3. Review the “Variance” column of the Quarterly Tax Reconciliation document
  • Any value greater than or less than “0” in the “Variance” column indicates discrepancy
  • Any discrepancies must be researched and resolved
  • Report discrepancies to Payroll Department as applicable
  • Payroll Department files Form 940C as necessary

  4.  Obtain UPS Tracking number used to ship Form 940 to IRS from Payroll Department

  5.  Go to www.ups.com , enter tracking number

  6.  Verify that shipment date for 940 shipment occurred on or before the 940 Due Date

  7.  Enter date shipped on Quarterly Tax Reconciliation document

  • Form 940 is due by January 31

  8.  If no discrepancies identified, F/EA Accountant prints Quarterly Tax Reconciliation document

  9.  F/EA Accountant signs and dates Quarterly Tax Reconciliation document next to “Prepared By”

10.  F/EA Accountant provides Quarterly Tax Reconciliation document and supporting documents to <<Staff Title>>

11.  <<Staff Title>> signs and dates Quarterly Tax Reconciliation document next to “Verified By”

12.  <<Staff Title>> scans all documents and stores them at <<File Path>>

13.  Signed reconciliation sheets are stored for a minimum of 7 years.

Internal Controls: 

The internal controls used by F/EA to monitor this process establish responsibility, segregate duties, document procedures and ensure independent internal verification.

  1. On a quarterly basis, F/EA reconciles 940 payments to EFTPS Batch Provider Payment Inquiry
    • This ensures that payments are reconciled quarterly prior to being reconciled again when the annual return is filed with the IRS
  2. Quarterly, 940 payments are reconciled as part of the standard bank reconciliation process
  3. The F/EA Accountant performs the quarterly 940 payment reconciliation
    • The F/EA Accountant verifies the supporting documents, the bank statement and 940 return for accuracy
    • The F/EA Accountant enters all transactions on a control document, the Quarterly Tax Reconciliation sheet. This sheet is prenumbered.
    • After performing the reconciliation, the F/EA Accountant signs and dates the control document.
  4. The F/EA Accountant performs the annual 940 return reconciliation
    • The F/EA Accountant verifies the supporting documents, the bank statement and 940 return for accuracy
    • The F/EA Accountant enters all transactions on a control document, the Quarterly Tax Reconciliation sheet. This sheet is prenumbered.
    • After performing the reconciliation, the F/EA Accountant signs and dates the control document.
  5. The <<Staff Title>> reviews the reconciliation statement and the supporting documents, the bank statement and 940 return for accuracy
    • The <<Staff Title>> verifies not only completeness, but also validity.
    • The <<Staff Title>> reviews all documents for mathematical accuracy.
    • After reviewing, the <<Staff Title>> signs and dates the control document, the reconciliation sheet.
  6. All control documents are password protected and access is restricted to F/EA Assigned staff with responsibility for reconciliations.
  7. The reconciliation and supporting documents are scanned and saved for a minimum of 7 years per the File Retention Policy.
Policy and Procedures: 
FUTA
940
form 940