How to Calculate Line 10 on IRS Form 940 (FUTA TAX RETURN)?

Step by Step Instruction to complete Line 10 of Form 940 (Worksheet)

When to complete Line 10 of Form 940 (worksheet)?

You have to fill the credit amount on Line 10 of Form 940 for any of the two reasons stated below.

  • If some of the Taxable FUTA wages you paid were excluded from State Unemployment Tax
  • If you paid any State Unemployment Tax late (after January 31st)

For ease of calculation, IRS has provided worksheet to calculate the credit amount that is to be filled on Line 10 of Form 940. The worksheet is only for record purposes, and it is not required when filing Form 940.

What are the information required to calculate Line 10 of Form 940?

Before you could start with the calculation, make sure you have these information handy.

  • Taxable FUTA wages (value given in Line 7 of Form 940)
  • Taxable state unemployment wages
  • Experience rates assigned to you by the states where you paid wages
  • Amount of state unemployment taxes you paid on time. Also, any state unemployment taxes you paid on nonemployees who were treated as employees by your state unemployment agency
  • Amount of state unemployment taxes you paid late

How to calculate Line 10 on Form 940 using the worksheet?

Maximum allowable credit

The maximum allowable credit is to be entered on Line 1 of the worksheet. The value is calculated by multiplying entry from line 7 of Form 940 with 0.054.

Form 940, line 7 x 0.054 = Line 1

Credit for timely state unemployment tax payments

On Line 2, enter the state unemployment tax payments that you made on time.

NOTE:

  • If the value on line 2 is more than or equal to line 1, then your worksheet is done. You can leave the Line 10 on Form 940 blank
  • Else, continue with your worksheet
Additional credit

You have to fill in Line 3 based on your response to the question below

“Were ALL of your assigned experience rates 5.4% or more?”

  • If Yes is your answer to the above question, enter zero on line 3 and continue to line 4
  • Else use the format given below to calculate the value for Line 3.

Line 3 = (0.054 - your assigned experience rate) x Taxable state unemployment wages at assigned experience rate

NOTE: List ONLY THOSE STATES for which your assigned experience rate was lower than 5.4%.

Subtotal

Line 4 is the sum of SUTA amount that you paid on time and with the additional credit.

Line 2 + Line 3 = Line 4

NOTE:

  • If the value on line 4 is more than or equal to line 1, then your worksheet is done. You can leave the Line 10 on Form 940 blank
  • Else, continue with your worksheet
Credit for paying state unemployment taxes late

What is your remaining allowable credit?

Line 5a is the difference between the maximum allowable credit (line 1) and the subtotal of the assigned credit (line 4).

Line 1 - Line 4 = Line 5a

How much state unemployment tax did you pay late?

On Line 5b, enter the amount of state unemployment tax paid after the deadline.

Line 5c: Which is smaller, line 5a or line 5b?

On Line 5c, enter the smaller value among 5a and 5b.

Line 5d: Your allowable credit for paying state unemployment taxes late

On Line 5d, multiply the value on Line 5c with 0.900.

Line 5c x 0.900 = Line 5d

Your FUTA credit

Line 6 is the sum of Line 4 and allowable credit for late payment (Line 5d).

Line 4 + Line 5d = Line 6

NOTE:

  • If the value on line 6 is more than or equal to line 1, then your worksheet is done. You can leave the Line 10 on Form 940 blank
  • Else, continue with your worksheet
Your Adjustment

Adjustments to be entered on Line 7 is the difference between the maximum allowable credit (Line 1) and your FUTA credit (Line 6).

Line 1 - Line 6 = Line 7

Enter the value of Line 7 from the worksheet on Line 10 of Form 940.

How TaxBandits assists you with Form 940 Line 10 (worksheet)?

Just give your inputs and TaxBandits does the adjustment calculations for you. The step-by-step process will get you clear on the credit to be filled in Line 10 of Form 940. The calculations are error free and accurate.

NOTE: If Line 9 of Form 940 does not apply to you, do not complete the worksheet.

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