Determining Your Base FUTA Tax
Part two of Form 940 determines the base amount the business must pay before any adjustments are made. Since the first $7,000 of each employee's income is taxable by the FUTA tax, all payments to all employees throughout the last calendar year must be listed. Certain payments and fringe benefits are exempt from this listing. Consult a tax professional to see if any of yours are. Once the sum is found, it is multiplied by the effective tax rate. The resulting product is the base FUTA tax.
Calculating FUTA Tax Adjustments
If the business's expenses were not SUTA taxable, or if the employer paid wages in a credit reduction state, certain adjustments can be made to the FUTA tax in order to adjust for these changes. If some of the FUTA wages were exempt from the state unemployment tax, or if any of the state unemployment taxes are going to be paid late, other adjustment must also be made.
The above steps are for a standard business tax reports. The American tax system is extremely complicated, however, and the aforementioned steps may change depending on a large variety of different circumstances. Please consult a tax professional if you are confused at any point while completing your taxes.