Who Else Wants to Understand The IRS Form 940?

If you are an small business owner with payroll, you are probably are familiar with the IRS form 941. That return you have to file quarterly. Many business owners are not as familiar with the Form 940. This is the form for reporting your Federal Unemployment Taxes. This form is filed annually, not quarterly, although you are required to make the 940 deposits quarterly if the balance for that quarter is over $500. Use the same 8109 form you use to deposit your 941 taxes just fill in the oval for 940.

If the amount of your FUTA tax is under $500 you can wait until the next quarter's deposit is due and add the previous quarters balance to the current quarter. When computing your tax remember that only the first $7000 in wages per employee is subject to the FUTA tax.

You compute the tax due by multiplying the rate times the total payroll for that quarter that is subject to the tax. The rate is normally 6.2% but is reduced by the State Unemployment Tax you pay. If you are eligible for the full credit, then your rate is only .8%.

Example:
Payroll for 1st Quarter 2009
Employee A $5000
Employee B $8000
All $5000 of employee A's wages are subject to FUTA tax
only $7000 of employee B's wages are subject so the total amount subject to the tax is $12,000. If you qualify for the full state credit, multiply
12,000 x .008 = $96. Your balance is under $500, so no balance for the quarter is due. (Note: the 7,000 is the max for the year not the quarter, so for any employee with wages over 7,000 in the 1st quarter, none of their wages for the other 3 quarters will be subject to the tax)

See the Instructions for form 940 to learn how to compute how much, if any of the state credit you are eligible for. You are required to have paid your state unemployment tax by the due date of the 940 to be eligible for the credit. This return is usually due the 2nd of Feb the following year. If your total balance for the year is $500 or less, you can send the payment in with your 940 return.

If you need additional help in completing this form or computing your FUTA taxes, contact a tax professional.

Help! What If I Can't Make My IRS Payment?

If you are one of thousands of taxpayers who are in a payment plan with the IRS, but due to current economic conditions cannot make your payment, you have options. If you have lost your job and your entire financial situation has changed, you need to contact the IRS and be prepared to lay out your new situation. If you expenses have not changed and your income is all that has changed, you may just need proof (like a termination letter) you no longer have a job.

If your expenses have changed as well, you may need to provide proof of those changes as well. When you talk to the IRS, only say what has happened and answer honestly and completely any questions they may ask. Do not volunteer information, except to briefly explain your situation. Don't get chatty, even if the person you talk is friendly and personable, remember, they work for the IRS. You could make one simple statement that could cause you problems.

If your liability is substantial and you need assistance, contact an Enrolled Agent, who can represent you before the IRS. What ever you do, do not ignore your situation. If you default you payment plan, the IRS can levy your bank accounts, retirement accounts and file a lien even if your tax liability is low. Call either the IRS or an Enrolled Agent before the IRS makes a bad financial situation even worse.

If You Ingore Them Will They Go Away?

If you have tax debt and like many tax payers you have decided to ignore them and hope they will go away. You seriously needed to reconsider. If you have received Certified Mail from the IRS and have considered not signing for it, think again. If you ignore the IRS, you do so at your own peril.

These notices from the IRS are sent to give you a chance to take care of your tax debt, before the IRS starting taking it from you.....on their terms. As long as you respond before the notice cycle ends, you have the options as to how you repay your liability. Once they start taking it out of your checking, savings and wages, you have lost that control.

Sign for those notices and either contact the IRS yourself or contact an Enrolled Agent to represent you before the IRS. Act before the options are taken out of your hands and your financial situations worsens.

Do I Need A Tax Attorney?

If you have tax debt, you may be wondering if you need to hire a tax attorney. If you need to go to tax court to resolve you tax problems, then yes, only an attorney can represent you. However, if you like most taxpayers with tax debt, you just need help resolving your tax debt with the IRS, you need an Enrolled Agent. An Enrolled Agent is a tax professional who has passed a set of exams administered by the IRS. An Enrolled Agent can represent you before the IRS and help you obtain the best possible resolution of your tax debt.

Enrolled Agents are familiar with the IRS policies and procedures and can assist those with tax debt in situations where a tax attorney or CPA is not required. Effectur is a company that employs Enrolled Agents (s0me of our EAs are former IRS employees). Use the link above to the Effectur site and get answers to your tax debt questions and see how to contact a tax consultant to help you on your way to resolving your tax debt.

Do You Know Your Appeal Rights?

Did you know that the IRS makes a determination that you disagree with, you may have Appeal rights? If you disagree with the final determination from an audit, a levy or lien you received, you have Appeal rights. You usually have a specific amount of time, often 30 days to file for an Appeal. The notice you received should tell you how long you have to file and how you need to do so. Here are some important points you need to know:

• Be prepared to show documentation to support your objection.
• An Appeals conference is an informal meeting. You can represent your self or have a CPA or Enrolled Agent to represent you.
• The conference can be held over the phone or in person.
• If you still disagree with the findings of the Appeals Officer, you can contest this ruling in Tax Court--this will require an attorney to represent you.

Publication 5 at irs.gov will give you more details. If you file and Appeal that is just based on your not liking the results, you Appeal will be denied. You need to have documentation to show you have reasonable cause to request a different determination. For instance, your audit showed you owe more taxes than you believe you owe. You found documentation for expenses that were not taken into consideration--that is a valid reason to Appeal.

If you need either representation for an Appeal or just someone to help you resolve you tax problems, contact an Enrolled Agent.