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Instructions for Form 940-EZ 2003 Tax Year

Specific Instructions

This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

You must complete lines A and B and Part I. If your FUTA tax (line 6) is over $100, you must also complete Part II. Please remember to sign the return.

Employer's name, address, calendar year, and employer identification number (EIN).   If you are not using a preaddressed Form 940-EZ, type or print your name, trade name, address, calendar tax year, and EIN on the form. Enter your name, address, calendar tax year, and EIN here, even if you must complete Form 940-EZ(V), Payment Voucher.

Employer identification number (EIN).   If you do not have an EIN, apply for one on Form SS-4, Application for Employer Identification Number, or by visiting the IRS website at www.irs.gov/smallbiz. If you do not have an EIN by the time your return is due, write “Applied For” and the date you applied in the space shown for the number.

Line A.   Enter the amount of your state unemployment contributions for 2003 that you paid by February 2, 2004 (or February 10, 2004, if that is your Form 940-EZ due date). If your state has given you a zero percent experience rate so there are no required contributions, enter “0% Rate.”

Line B(1).   Enter the state where you paid state unemployment contributions. If you paid to more than one state, you must file Form 940.

Line B(2).   Enter your state reporting number.

Final return.   If you will not have to file Form 940-EZ (or Form 940) in the future, check the box on the line below line B(2) and complete and sign the return. If you start paying FUTA wages again, file Form 940-EZ (or Form 940).

Part I. Taxable Wages
and FUTA Tax

Line 1 — Total payments.   Enter the total payments (before any deductions) you made during the calendar year for services of employees, even if the payments are not taxable for FUTA tax. Include salaries, wages, commissions, fees, bonuses, vacation allowances, and amounts paid to temporary or part-time employees; the value of goods, lodging, food, clothing, and noncash fringe benefits; contributions to a 401(k) plan, payments to an Archer MSA, payments under adoption assistance programs, and contributions to SIMPLE retirement accounts (including elective salary reduction contributions); section 125 (cafeteria) plan benefits; and sick pay (including third-party sick pay if liability is transferred to the employer).

  For details on sick pay, see Pub. 15-A, Employer's Supplemental Tax Guide. Report amounts deferred under a nonqualified deferred compensation plan at the later of: (a) when services are performed or (b) when there is no substantial risk of forfeiture of the rights to the deferred amount. For details, see Regulations section 31.3306(r)(2)-1. Also, include tips of $20 or more in a month reported to you by your employees.

  Your method of payment does not determine whether payments are wages. Thus, you may pay wages hourly, daily, weekly, monthly, or yearly. You may pay wages for piecework or as a percentage of profits. You may pay wages in cash or some other way, such as goods, lodging, food, or clothing. For items other than cash, use their fair market value when paid.

Line 2 — Exempt payments.   The amounts reported on line 2 are exempt from FUTA tax. For FUTA tax purposes, “wages” and “employment” do not include every payment and every kind of service an employee may perform. In general, payments excluded from wages and payments for services excepted from employment are not subject to FUTA tax. Do not enter payments over $7,000 for each employee that you enter on
line 3.

  You may deduct exempt payments from total payments only if you explain them on line 2. Amounts that may be exempt from your state's unemployment tax may not be exempt from FUTA tax. For example, corporate officers' wages are not exempt from FUTA tax even though your state may exempt those wages from its unemployment tax.

   Enter payments such as the following on line 2. These payments also must be entered on line 1.
  1. Agricultural labor if you did not meet either 1 or 2 under Agricultural employers on page 2 and all payments to “H-2(A)” visa workers.
  2. Benefit payments for sickness or injury under a workers' compensation law.
  3. Household service if you did not pay total cash wages of $1,000 or more in any calendar quarter in 2002 or 2003.
  4. Certain family employment. (See section 3 in Circular E (Pub.15).)
  5. Certain fishing activities. (See Pub. 595, Tax Highlights for Commercial Fishermen.)
  6. Noncash payments for farmwork or household services in a private home. (Only cash wages paid to these workers are taxable.)
  7. Value of certain meals and lodging. (See section 5 in Circular E (Pub.15).)
  8. Cost of group-term life insurance.
  9. Payments attributable to the employee's contributions to a sick-pay plan.
  10. Employer contributions to a SIMPLE retirement account (other than elective salary reduction contributions) and employer contributions to a 401(k) plan (if included on line 1).
  11. Employer payments to an Archer MSA.
  12. Benefits excludable under a section 125
    (cafeteria) plan.
  13. Certain statutory employees. (See section 1 in
    Pub. 15-A.)
  14. Services performed by an inmate of a penal institution.
  15. Employer reimbursements (including payments to a third party) for qualified moving expenses, to the extent such expenses would otherwise be deductible by the employee. (See Pub. 521, Moving Expenses.)
  16. Any other exempt service or pay.

  For more information, see section 15 in Circular E (Pub.15) or section 15 in Circular A (Pub. 51), Agricultural Employer's Tax Guide.

Line 3 — Payments of more than $7,000 for services.   Enter the total of amounts over $7,000 you paid to each employee during 2003 after subtracting any exempt payments shown on line 2. For example, you had 10 employees and paid each $9,000 during the year, including $500 of exempt payments per employee. Enter $15,000 on line 3, computed as follows:

  
Total payments (10 x $9,000) $90,000  
Less: Exempt payments (10 x $500) ($5,000)  
Less: Total wage base amount (10 x $7,000) ($70,000)  
Amount reported on line 3 $15,000  

   Only the first $7,000 paid to each employee is subject to FUTA tax. Do not use the state wage base for this entry. The state wage base may be different from the Federal wage base of $7,000. Do not include any exempt payments from line 2 in figuring the $7,000.

Line 8 — Balance due.   Make your check or money order payable to the “United States Treasury.” Write your EIN, “Form 940-EZ,” and “2003” on your check or money order. Enter the amount of the payment on Form 940-EZ(V) at the bottom of Form 940-EZ. If the employer information is not preprinted on the payment voucher, enter the requested information. (Make certain that the entity information above line A is properly completed.)

  If the amount on line 8 is under $1, you do not have to pay it. For payments over $100, see Depositing FUTA Tax on page 3.

  

Line 9 — Overpayment.   If the amount on line 9 is under $1, we will send a refund or apply it to your next return only on written request.

Part II. Record of Quarterly Federal Unemployment Tax Liability

Complete this part only if your FUTA tax on line 6 is over $100. To figure your FUTA tax for each quarter, multiply by .008 that part of the first $7,000 of each employee's annual wages you paid during the quarter. Enter the result in the space for that quarter. Your “Total for year” must equal your total FUTA tax shown on
line 6.

Record your FUTA tax liability based on when you pay wages, not on when you deposit it. For example, if you pay wages on March 29, your FUTA tax on those wages is $200, and you deposit the $200 on April 30, you would record that $200 in the first quarter, not in the second.

Example.

You had two employees and paid each employee $4,000 in the first quarter, $5,000 in the second quarter, $5,000 in the third quarter, and $5,000 in the fourth quarter. (None of the payments were exempt from FUTA tax.) For the first quarter, multiply .008 x $8,000 (the amount paid to both employees), and enter $64 in the space for the first quarter. For the second quarter, multiply .008 only by $6,000 ($3,000 for each employee — the amount remaining to reach the $7,000 maximum amount subject to FUTA tax for each employee), and enter $48 in the space for the second quarter. Because you paid each employee more than $7,000 by the end of the second quarter, enter zero in the space for the third and fourth quarters. Enter $112 in the “Total for year” space.

Third Party Designee.   If you want to allow any individual, corporation, firm, organization, or partnership to discuss your 2003 Form 940-EZ with the IRS, check the “Yes” box in the “Third Party Designee” section of the return. Also, enter the name, phone number, and any five numbers the designee chooses as his or her personal identification number (PIN). The authorization applies only to the tax form upon which it appears.

  By checking the “Yes” box, you are authorizing the IRS to call the designee to answer any questions relating to the information reported on your tax return. You are also authorizing the designee to:
  • Exchange information concerning your tax return with the IRS, and
  • Request and receive written tax return information relating to your tax return including copies of specific notices, correspondence, and account transcripts.

  You are not authorizing the designee to receive any refund check, bind you to anything (including additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee's authorization or desire automatic issuance of copies of notices, see Publication 947, Practice Before the IRS and Power of Attorney.

  The Third Party Designee authorization automatically expires one year from the due date (without regard to extensions) for filing your 2003 Form 940-EZ. If you or your designee desire to terminate the authorization, a written statement conveying your wish to revoke the authorization should be submitted to the IRS Service Center where the return was processed.

Signature.   Form 940-EZ must be signed as follows:
  • Sole proprietorship – The individual owning the business.
  • Corporation – The president, vice president, or other principal officer.
  • Partnership or unincorporated organization – A responsible and duly authorized member or officer having knowledge of its affairs.
  • Single member limited liability company treated as a disregarded entity –The owner of the limited liability company.
  • Trust or estate – The fiduciary.

  The return may also be signed by a duly authorized agent of the taxpayer if a valid power of attorney has been filed.

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