For managing a business with employees, you need to navigate and fulfill various tax requirements. There are two such important forms: Form 940 and Form 941. These forms are used to report various types of taxes and serve distinct purposes.
In this article, we will show you how you can amend or correct Forms 940 and 941 that you have already filed. Read on if you’re ready to learn the answer to what the 940 and 941 Forms are. This guide helps to get to know your amendment form and describes to you what you can correct in the form.
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Understanding 940 Form
The Form 940 is used to report the Federal Unemployment Tax Act(FUTA) taxes. It is a federal tax that provides support for individuals actively seeking employment. But they are currently unemployed. A FUTA tax is that is paid fully by the employer, and is not withheld from an employee’s salary.
FUTA Taxable wages rate: Only the first $7,000 paid to each employee annually is subject to FUTA tax. This means that if an employee earns $10,000 in a year. You will only need to calculate the FUTA tax on the first $7,000. Any wages beyond this threshold are FUTA-exempt.
Annual filing date: This form must be filed only by those employers who paid wages of $1,500 or more to employees in a calendar year. Including having an employee for at least 20 weeks in the year. The due date for filing Form 940 each year is January 31. But if a business owes more than $500 in FUTA tax in a quarter, it must file according to quarterly tax deadlines.
State Unemployment Tax Credit: Employers can receive a credit for paying state unemployment taxes. It helps to reduce the effective FUTA rate. It means, if an employer pays into any state unemployment fund, a credit of 5.3% is given by the IRS at the time of filing Form 940. This means the effective rate payable will only be 0.7%
What are 941 Forms?
The Form 941 is a Quarterly Employment Tax return. It is an IRS form used by the employer to report the federal income tax withheld from an employee's wages, Social Security Tax, and Medicare Tax. And employee shares of Social Security and Medicare taxes. It's also known as the Federal Insurance Contribution Act(FICA).
File filing date- Form 941 filed in every quarter. The due date of the 941 Form is the last day of the month. It follows the end of the quarter. For example, the first quarter (January 1–March 31) is due on April 30. If the filing date falls on a weekend. It moves to the next working day.
How to amend the 941 Form(Quarterly)
To amend the 941 form, employees must use the specific IRS procedure and forms. If you have a 941 form, you must download the IRS Forms. Form 941 using 941-X for correction. It's an amended form of the 941 form, file Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for refund.
Some points that help to correct the 941 form are:
Use a separate form for each quarter: Submit a separate Form 941-X for each incorrect Form 941 that you need to correct.
Identify underpayment or overpayment: Show if you have some underreported income (in this case, you owe more tax) or if you overreported (in this case, you paid too much tax).
Describe the change: On Form 941-X, part 4, you have to give a detailed explanation of how you came up with the corrections.
File and pay:
In case of an underpayment, file Form 941-X accompanied by a payment for any additional tax to be free of penalties and interest.
If you are fixing an overpayment, you may either ask for a refund or apply the overpayment as a credit to a future Form 941.
Electronic Filing versus Paper Filing: The IRS allows e-filing of Form 941-X for the tax years starting in 2024. For the years before 2024, the filing has to be done via paper.
Limitation period: Normally, the Form 941-X must be filed not later than three years from the date. When the original Form 941 was submitted, or two years from the date. And the tax was paid, whichever comes later.
How to amend the 940 Form(Annually)
To amend a previously filed Form 940. You must use the same federal Form 940 from the same year it was filed. Then check the amended box of Form 940. You can fill in all the amounts that should have been on the original form.
Some points that help to correct the 941 form are:
Mark the Return as Amended: Identify the "Amended" box on page 1 of the revised Form 940. On page 2, review the amount. These amounts should be the same as they were on the original form. And check it under "Type of Return".
Use the form from the right year: For instance, when changing a 2023 return, the 2023 Form 940 should be used.
Enter the correct figures: The form will guide you through the computation of the accurate FUTA tax liability.
Make an explanation available: Along with your form, you should have a detailed explanation setting out why you are filing an amended return.
Attach Schedule A (if applicable): If you are a multi-state employer or operate in a credit reduction state. You should complete Schedule A and attach it.
Send the form: A change in Form 940 can only be done by paper filing, and the form should then be mailed to the IRS, even if the original return was e-filed. Depending on your business location and whether you are making a payment, use the appropriate mailing address.
No exact deadline: You are not limited by a specific deadline in filing an amended Form 940. But correction of errors should be done promptly, usually within the same three-year limitation period as Form 941-X.
Conclusion
In this blog, we have mentioned the entire procedure to amend and correct Forms 940 and 941. And we understand that, for managing a business with employees, we need to fill this form quarterly or annually, as per your needs. We hope our guidance helps you to resolve your queries. If you face any issues in understanding, you can contact our team they will guide you and help to resolve your problem.
