940 or 41...I know it's 9-something

In the world or taxation, it is very easy to get lost among the jargon and numerous forms. Two forms that always seem to get confused with one another are the IRS Forms 940 and 941. Obviously at first glance you might assume these two IRS forms must be similar. I mean, the number 941 does follow 940. But form 940 could not be any more different than form 941.

IRS Form 940- a.k.a. The Annual Unemployment Tax Return. Each business is to report all Federal Unemployment Tax Act (FUTA) tax based on the amount paid to each employee. As far as the federal base is concerned, the tax applies to the first $7,000 paid to each employee in a year after subtracting any exempt payments. Futa tax, along with state unemployment systems, provides payment of unemployment compensation to workers who have lost their jobs.

IRS Form 941- a.k.a. The Employer Quarterly Tax Return. All businesses that withhold wages from their employees are required to file 941s each calendar quarter. Any business that pays more than $2,500 in net taxes is required to make quarterly deposits to authorized financial institutions.

You see. Two very different things. But what gets me is how a business owner will call in looking for help with payroll taxes and not know the difference between these two forms. Seriously, 0nce you know what each is, there should not be any confusion from that point forward. And as a business owner, you are expected to remember which is which and pay both. Maybe that's an indication of why they have the tax problems they do....hmmm.

Cheers!
-Taxus

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