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Part 3. Submission Processing

Chapter 11. Returns and Documents Analysis

Section 154. Unemployment Tax Returns (Cont. 2)

3.11.154  Unemployment Tax Returns (Cont. 2)

3.11.154.6 
Form 940 and Form 940-PR - Procedures for Coding & Editing Returns (Revisions 2006 through 2011)

3.11.154.6.2 
Part 1 of Form 940/940-PR (Revisions 2006 through 2011 ) - Single Multi-State and Credit Reduction Boxes

3.11.154.6.2.1  (01-01-2012)
Part 1 - Box "1a" , Single State and Box "1b" , Multi-State Boxes

  1. Box "1a" should be completed by single state filers. The taxpayer should enter a valid state code in Box "1a" if they paid unemployment wages in one state only.

  2. Box "1b" should be marked if the taxpayer paid unemployment wages in more than one state. If Box "1b" is marked, Schedule A should be attached. The taxpayer should mark all the appropriate states on Schedule A if they are a multi-state filer.

  3. Exhibit 3.11.154-12 for a list of valid state codes for purposes of unemployment tax.

  4. If the taxpayer has marked Box "1a" and/or Box "1b" incorrectly, examine the return and attachments to determine the taxpayer's intent. Use the table below to resolve.

    Caution:

    Be sure to edit an asterisk (*) to the left of the box that is being deleted.

    IF THEN
    There is no entry in either Box "1a" or Box "1b" and the state code in the entity portion of the return is AA, AE, AP, AS, FM, GU, MH, MP, or PW, or Foreign country is listed. Leave blank.
    If Box "1a" is marked, Box "1b" should not be marked.
    Only one of these boxes can be marked.
    If the taxpayer is a single state filer, A valid state code should be present in Box "1a" .

    Note:

    The taxpayer cannot mark Box "1b" and list just a single state in Part 1 of Schedule A Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011).

    There is an invalid state code shown in Box "1a" or a Foreign Country is listed, 1. Use an asterisk (*) to the left to delete the invalid state code and edit the valid state code from the entity portion of the return, or from the return or attachments.

    2. If no valid state code is present in the entity area or on the return or attachments, use an asterisk (*) to delete the entry in Box "1a" .
    Box "1a" is blank, or contains a valid state code and Schedule A is attached, 1. Examine the return and attachments to determine if the taxpayer is a single or multi-state filer.

    2. If the state shown in Box "1a" is the only state checked on Schedule A:

    a. Use an asterisk (*) to delete the state code on Schedule A.

    b. Edit the state code from Schedule A to Box "1a" , if blank.

    c. Use an asterisk (*) to delete the entry in Box "1b" , if it is checked.

    3. If multi-states are shown on Schedule A:

    a. Use an asterisk (*) to delete Box "1a" .

    b. Mark Box "1b" .

    c. Check the state shown in Box "1a" on Schedule A, if it is not checked.
    Box "1a" contains a valid state code, and Schedule A is not attached, but the return or attachments indicate that it is a multi-state filer,
    1. Attach Schedule A and check the appropriate state boxes.

    2. Asterisk (*) to the left of to delete the state code in Box "1a" .

    3. Mark Box "1b" .
    Box "1b" is marked and Schedule A is not attached, 1. Examine the return and attachments.

    2. If no states are listed:

    a. Edit the valid state code from the entity section of the return to Box "1a" .

    b. Use an asterisk (*) to delete Box "1b" .

    3. If multi-states are shown on an attachment, edit to Schedule A.

    4. If unable to determine a valid state code, leave blank.
    Box "1a" contains a valid state code and Box "1b" is blank or checked, 1. If the state shown in Box "1a" is the only state checked on Schedule A:

    a. Use an asterisk (*) to delete the state code on Schedule A.

    b. Use an asterisk (*) to delete the entry in Box "1b" , if it is checked.

    2. If multi-states are shown on Schedule A:

    a. Use an asterisk (*) to delete Box "1a" .

    b. Mark the state code shown in Box "1a" on Schedule A, if it is not marked.

    c. Mark Box "1b" , if it is not marked.

    3. If Schedule A is not attached, but the return or attachments indicate that it is a multi-state filer:

    a. Attach Schedule A and check the appropriate state boxes.

    b. Use an asterisk (*) to delete the state code in Box "1a" .

    c. Check the state shown in Box 1a on Schedule A, if it is not checked.

    d. Mark Box "1b" , if it is not marked.
    There is no entry in Box "1a" or Box " 1b" , 1. Examine the return and attachments.

    2. If no states are listed, edit the valid state code from the entity section of the return to Box "1a" .

    3. If multi-states are shown on Schedule A, mark Box "1b" .

    4. If multi-states are shown on an attachment:

    a. Edit to Schedule A.

    b. Mark Box "1b" .

    5. If unable to determine a valid state code, leave blank.

3.11.154.6.2.2  (01-01-2012)
Part 1 - Box "2" , Credit Reduction Box

  1. Box "2" is used by taxpayers who have paid wages in states that are subject to credit reduction. Credit Reduction applies to Tax Years 1974, 1976 through 1987, 1991, 1992, 2004,2005, 2009, 2010 and 2011 returns. Exhibit 3.11.154-1 and Exhibit 3.11.154-2

  2. Exhibit 3.11.154-19 for a list of credit reduction states, years and applicable rates.

    Note:

    Do not edit Credit Reduction information on Early-Filed returns.

    IF THEN
    Credit Reduction Applies, Box "2" must be checked. If the taxpayer fails to check Box "2" , mark Box "2" .
    The taxpayer checks Box "2" , 1. Part 2 of Schedule A (Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) should be attached and completed.
    Credit Reduction applies, but the taxpayer fails to mark Box "2" , 1. Check Box "2" to indicate that credit reduction applies.
    2. Edit the credit reduction information to Schedule A, if necessary.
    The taxpayer enters a valid state code in Box "1a" and checks Box "2" ,
    1. If Schedule A is not attached and completed, and the state in Box "1a" is a credit reduction state, attached Schedule A and edit the credit reduction information on the Schedule A.
    2. If the state shown in Box "1a" is not a credit reduction state:
    a. Delete the entry in Box "2" .
    b. Delete the credit reduction information from the Schedule A.
    The Taxpayer checks Box "1b" and Box "2" ,
    1. Review the return and attachments to determine credit reduction information.

    1. If Schedule A is attached, edit the information to the appropriate area(s) on Schedule A, Exhibit 3.11.154-19 for Credit Reduction Years, States and Rates.

    2. If Schedule A is not attached and/or you are unable to determine the credit reduction wage or state information, correspond.

3.11.154.6.3  (01-01-2012)
Part 2 of Form 940/940-PR (Revisions 2006 through 2011) - Computation of Taxable Wages

  1. Part 2 should be completed by the taxpayer. If Part 2 does not contain sufficient information to determine Line 7a, Total Taxable FUTA Wages, correspond.

    Exception:

    It is not necessary to obtain Part 2 information from the taxpayer when they indicate "not liable" , zero, dash, all blank entries or" final return " and the return has been signed. We should consider taxpayer intent.

3.11.154.6.3.1  (01-01-2012)
Part 2, Line 3 - Total Payments to Employees

  1. The taxpayer will enter the amount of total payments made to all employees on Line 3 of Part 2.

    IF THEN
    The taxpayer enters the same amount on Line 3 and Line 5, Send a 142C Letter to the taxpayer for the correct Line 5 entry.
    The taxpayer does not reply, Disallow the entry on Line 5. Bring the amount from Line 3 to Line 7a, making the return taxable.

3.11.154.6.3.2  (01-01-2012)
Part 2, Line 4 - Exempt Payments

  1. The taxpayer will enter an amount on Line 4 if they claim an exempt payment.

  2. The taxpayer should check one, or more than one of the boxes on line 4 to show the type of exempt payment.

    IF THEN
    There is an entry on Part 2, Line 4, Accept the taxpayer's figure on Line 4.
    None of the Boxes 4a through 4e are checked, Consider the entry to be 4e. Do not correspond.
    Line 4, 5, and 6 are identical, Consider them as a misplaced entry and correspond for the correct line entries.

3.11.154.6.3.3  (01-01-2012)
Part 2, Line 5 - Excess Payment

  1. The taxpayer will enter an amount on Line 5 showing the total of payments made to each employee in excess of $7,000.

    IF THEN
    The taxpayer enters the same amount on Line 3 and Line 5, Send a 142C Letter to the taxpayer for the correct Line 5 entry.
    The taxpayer does not respond, Disallow the entry on Line 5. Bring the amount from Line 3 to Line 7a, making the return taxable.

3.11.154.6.3.4  (01-01-2012)
Part 2, Line 6 - Subtotal of Exempt and Excess Payments

  1. The taxpayer should add the amount from Line 4 and Line 5 and enter the total on Line 6.

    IF THEN
    There is no entry on Lines 4 or 5, but there is an entry on Line 6, Accept the taxpayer's entry on Line 6. Do not correspond.
    If Line 6 is greater than Line 3, Correspond with the taxpayer using Form 12522 (142C Letter) requesting the correct amounts.
    Total exempt and excess payments cannot exceed total payments.
    The taxpayer does not respond, 1. Enter an asterisk (*) as closely as possible to the left of the taxpayer's entry.
    2. Edit the amount on Line 3 to Line 7a, making the return taxable.

3.11.154.6.3.5  (01-01-2012)
Part 2, Line 7a - Total Taxable FUTA Wages

  1. Line 7a, Total Taxable FUTA Wages, is computed by subtracting the subtotal of exempt payments and excess payments from the total payments made to all employees.

    IF THEN
    If there is an entry on Line 3 (Total Payments) and Lines 4 through 7a show a significant entry such as a "0" (zero), dash"-" or the word "None" written on the line, Edit the amount from Line 3 to Line 7a or compute and enter Line 3 less Line 6.
    Line 3 and Line 7a have no entries, Correspond to obtain the total taxable wages.
    Line 7a is blank or zero because Line 5 equals Line 3, Correspond to obtain the total taxable wages.

3.11.154.6.3.6  (01-01-2012)
Part 2, Line 7b FUTA Wages paid before 7/1/2011 x .008 tax rate

  1. Line 7b, FUTA Wages paid before 7/1/2011, is computed by multiplying the wages (the amount in the box before the .008 tax rate and enter the tax amount in the box after the .008 tax rate (line 7c).

    IF THEN
    Line 7b (box in front of .008 tax rate ) is blank Divide the amount on Line 7c ( the tax amount in the box after .008) by .008 and enter the result in the box in front of .008 (line 7b)
    Line 7c (box after .008) is blank Multiply the wages amount by .008 tax rate and enter the result on Line 7c
    Line 7b is blank (no wages amount in the box before .008) and no tax amount in the box after .008 (Line 7c) Correspond to obtain the wages and tax amount
    The entry is a negative number, Enter an asterisk (*) as closely as possible to the left of the entry.

3.11.154.6.3.7  (01-01-2012)
Part 2, Line 7d - FUTA Wages paid after 06/30/2011 x .006 tax rate

  1. Line 7d, FUTA Wages paid after 06/30/2011, is computed by multiplying the wages amount in the box before the .006 tax rate and enter the tax amount in the box after the .006 tax rate (line 7e).

    IF THEN
    Line 7d (box in front of .006 tax rate) is blank Divide the amount on Line 7e (the amount in the box after .006) by .006 and enter the wage amount in the box in front of .006 (line 7d)
    Line 7e (box after .006) is blank Multiply the wages amount by .006 and enter the tax amount on Line 7e
    Line 7d is blank (no wages amount in the box before .006) and no tax amount in the box after .006 Correspond to obtain the wages and tax amount
    The entry is a negative number, Enter an asterisk (*) as closely as possible to the left of the entry.

3.11.154.6.3.8  (01-01-2012)
Part 2, Line 8 - FUTA Tax Before Adjustments

  1. Line 8 is computed by adding the amount on line 7b plus the amount on line 7d.

    IF THEN
    Line 8 is blank or illegible, Take no action. Do not compute using total taxable wages on Line 7b plus line 7d. . The Error Resolution Tax Examiner will perfect the return based on the computer's calculation.
    The entry is a negative number, Enter an asterisk (*) as closely as possible to the left of the entry.

3.11.154.6.4  (01-01-2012)
Part 3 of Form 940/940-PR (Revisions 2006 through 2011) - Adjustments and Credit Reduction

  1. The taxpayer is not required to attach any supporting documentation. The taxpayer will determine the figures to enter on the adjustment lines. The 940 Instructions will guide the taxpayer in determining the amount of the adjustments, if any. The adjustments will only apply in certain instances such as:

    • All of the FUTA wages paid by the taxpayer were excluded from state unemployment tax.

    • Some of the FUTA wages paid by the taxpayer were excluded from state unemployment tax, or if the taxpayer paid any state unemployment tax late.

    • The taxpayer paid wages in a credit reduction state. (Credit Reduction will not apply for Tax Year 2006 or 2007).

    Note:

    If credit reduction does not apply for a particular year, Line 11 will not be present on the tax form. It will be grayed out.

3.11.154.6.4.1  (01-01-2012)
Part 3, Line 9 - Adjustment (All Wages Paid Were Excluded From State Unemployment Tax)

  1. There may or may not be an entry on Line 9. The taxpayer will complete this line only if it applies to them. If all of the FUTA wages paid were excluded from state unemployment tax, the taxpayer should calculate the amount to enter on Line 9. Line 9 is equal to Line 7a times .054.

    IF THEN
    The taxpayer has entered an amount on Line 9, 1. There cannot be an entry on Line 10.
    2. There cannot be an entry on Line 11 if Credit Reduction applies.
    There is an entry on Line 9 and Line 10, Enter an asterisk (*) as closely as possible to the left of the entry on Line 10.
    There are entries on Line 9 and Line 11, 1. Enter an asterisk (*) as closely as possible to the left of the entry on Line 11.
    2. Delete any entries shown on the Schedule A.

3.11.154.6.4.2  (01-01-2012)
Part 3, Line 10 - Adjustment (Some FUTA Wages were Excluded from State Unemployment Tax or Any State Unemployment Tax was Paid Late)

  1. There may or may not be an entry on Line 10. The taxpayer will calculate the amount to be entered on Line 10. Accept the taxpayer figures.

    IF THEN
    The taxpayer has entered an amount on Line 10, 1. There cannot be an entry on Line 9.
    2. There can be an entry on Line 11, if Credit Reduction applies.
    If there is an entry on Line 9 and Line 10, 1. Enter an asterisk (*)as closely as possible to the left of the entry on Line 10.
    2. Enter an asterisk (*) to the left of the entry on Line 11, if present.

3.11.154.6.4.3  (01-01-2012)
Part 3, Line 11 - Credit Reduction

  1. If the taxpayer has paid wages in a state that is subject to credit reduction, Schedule A should be completed and the total from Line 3 of Schedule A( Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) should be entered on Form 940, Part 3, Line 11. If Credit Reduction does not apply for a particular year, Line 11 will not be present on the return. It will be grayed out.

    Note:

    Do not edit Credit Reduction information on Early-Filed returns.

    IF THEN
    There is an entry on Line 11, 1. There cannot be an entry on Line 9.
    2. There can be an entry on Line 10.
    There are entries on Line 9 and Line 11, 1. Enter an asterisk (*) as closely as possible to the entry on Line 11.
    2. Asterisk (*) any entries shown on Schedule A, if present.
    There is an entry on Line 11, such as Zero or 0.00 Process the return. Enter the credit reduction amount from Schedule A, (Line 3) on Line 11.

3.11.154.6.5  (01-01-2012)
Part 4 of Form 940/940-PR (Revisions 2006 through 2011) - Determining FUTA Tax After Adjustments

  1. In this section, the taxpayer will determine the amount of FUTA tax by making the necessary calculations in Parts 2 and 3 of the Form 940 and applying any payments deposited to determine an underpayment or overpayment.

  2. If Line 12, and Line 13 , and Line 14 are the same, delete Line 13.

3.11.154.6.5.1  (01-01-2012)
Part 4, Line 12 - Total FUTA Tax After Adjustments

  1. Total FUTA Tax After Adjustments

    IF THEN
    Line 12 is blank or illegible, Perfect from the return or attachments, if possible.
    The return has been completed by the taxpayer, or if it has been perfected from the information provided by the taxpayer, Perfect Line 12, if possible.
    The entry is a negative number, Enter an asterisk (*) as closely as possible to the left of the entry.

3.11.154.6.5.2  (01-01-2012)
Part 4, Line 13 - FUTA Tax Deposited

  1. Line 13 will contain the total amount of FUTA tax deposited for the year and should include any payments that were applied from a prior year.

    IF THEN
    Line 13 cannot be perfected from the return or attachments, Leave it blank.
    The entry is a negative number, Enter an asterisk (*) as closely as possible to the left of the entry.

3.11.154.6.5.3  (01-01-2012)
Part 4, Line 14 - Balance Due

  1. If the balance due is more than $500 , the taxpayer must make a deposit. If the tax is $500 or less, the taxpayer may make a payment with the return.

    Reminder:

    Code & Edit will not longer edit a P&I Code on Form 940 and Form 940-PR.

    IF THEN
    Line 14 is blank or illegible, Perfect from the return or attachments, if possible.
    The return shows an FTD Penalty, Subtract from the balance due amount.
    Line 14 includes a penalty amount (other than the FTD penalty) or interest, Reduce the balance due by these amounts.

3.11.154.6.5.4  (01-01-2012)
Part 4, Line 15 - Overpayment

  1. If Line 13 is more than Line 12, the difference should be entered on Line 15.

    Reminder:

    Code & Edit will not longer edit a Penalty and Interest (P&I) Code on Form 940 and Form 940-PR.

    IF THEN
    This line is blank or illegible, Perfect from the return or attachments, if possible.
    The return shows a FTD Penalty, Add the FTD penalty to the overpayment.

3.11.154.6.6  (01-01-2012)
Part 5 of Form 940/940-PR (Revisions 2006 through 2011) - Record of Quarterly Federal Unemployment Tax Liability (ROFTL)

  1. Only the quarterly liability amounts are transcribed and may require editing. The Total Tax Liability amount in Part 5, Line 17 is not transcribed.

    IF AND THEN
    Only the fourth quarter is blank, Line 13 is larger than the sum of the first three quarters Edit the difference between Line 13 and the sum of the three quarters to the fourth quarter.
    The taxpayer may have entered wages instead of tax on Line 17, Line 7a is the same amount as Line 17 and Line 12 is more than ≡ ≡ ≡ , Multiply the wage amount shown for each quarter by .006 and edit the correct entries to Part 5, Lines 16a through 16d. Figure 3.11.154-15
    The taxpayer entered a negative figure in any quarter of the liability fields in Part 5, Lines 16a through 16d,   Enter SIC "1" IRM 3.11.154.6.6.1

    Figure 3.11.154-15
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.154.6.6.1  (01-01-2012)
Form 940/940-PR (Revisions 2006 through 2011) - Schedule Indicator Code - SIC

  1. The Schedule Indicator Code (SIC) is used to notify the computer that the Quarterly Federal Tax Liability for Unemployment Tax (ROFTL), Part 5, is incomplete or unnecessary.

  2. Edit SIC Code "1" when:

    1. Line 12, Part 4, is $500 or less.

    2. The ROFTL Total is $500 or less.

    3. There is a negative amount in the ROFTL.

    4. The ROFTL is blank.

    5. There is a total in the ROFTL, but there are no Quarterly Liability Amounts present.

    6. Line 12, Part 4 is more than $500 and the Total in the ROFTL is more than $500, and there is a difference of more than ≡ ≡ ≡ between the two amounts.

  3. When SIC "1" is edited, the computer will determine if a Federal Tax Deposit penalty should be assessed based on a quarterly average of the total liability for the year. Edit the SIC Code in the following locations:

    FORM LOCATION
    940 (Revisions 2006 through 2011) On Page 1, to the right of the Part 1 line. Exhibit 3.11.154-1
    940-PR (Revisions 2006 through 2011) On Page 1, to the right of the Parte 1 (Part 1) line. Exhibit 3.11.154-2

3.11.154.6.7  (01-01-2012)
Part 6 of Form 940/940-PR (Revisions 2006 through 2011) - Third Party Designee

  1. Part 6 of the redesigned form is the area that is used by the taxpayer to signify that a third party may discuss the tax return with an IRS representative. IRM 3.11.154.2.16

3.11.154.6.8  (01-01-2012)
Part 7 of Form 940/940-PR (Revisions 2006 through 2011)- Signature Area

  1. Part 7 of the redesigned form is the area that is used by the taxpayer to sign the return.

  2. The signature must appear in either the "Sign your name here" box, or on the "Signature" line. IRM 3.11.154.2.18

  3. Beginning with Tax Year 2008, Part 7 will also include Paid Preparer Information.

3.11.154.6.9  (01-01-2012)
Part 8 of Form 940/940-PR (Revision 2006 and Revision 2007 ) - Paid Preparer Information

  1. Paid Preparer information is included on the Form 940 and Form 940-PR in Part 8 (Revision 2006 and Revision 2007).

  2. Beginning with Revision 2008, the Paid Preparer Information will be included in Part 7. IRM 3.11.154.2.17

3.11.154.6.10  (01-01-2012)
Schedule A of Form 940/940-PR (Revisions 2006 through 2011) - Multi- State Employer and Credit Reduction Information

  1. Schedule A of the redesigned Form 940 is used for reporting wages paid in multiple states and credit reduction information. Exhibit 3.11.154-1 and Exhibit 3.11.154-2

  2. If Schedule A is attached, Box "1b" and/or Box "2" must be marked on Form 940.

  3. For a converted 2005 Revision containing 2006, 2007 or 2008 tax information, insert and edit Schedule A, if applicable. Exhibit 3.11.154-7

    Note:

    If a loose Schedule A is received without a Form 940, forward the Schedule A to Accounts Management.

3.11.154.6.10.1  (01-01-2012)
Part 1 of Schedule A of Form 940/940-PR (Revisions 2006 through 2011) - Multi-State Employers

  1. The taxpayer will check the state abbreviation boxes for each state in which they were required to pay state unemployment tax.

  2. Part 1 of Schedule A should not be used for a single state filer (Revisions 2006 through 2010) or page 1, Schedule A (2011 Revision).

  3. If Schedule A is attached, and Part 1 (Revisions 2006 through 2010) is completed or page 1, Schedule A (Revision 2011), Box " 1b" should be checked, and there should be no entry in Box " 1a" .

    Caution:

    Be sure to use an asterisk(*) .

    IF THEN
    It is necessary to delete the entire Schedule A, Place a "/" through the entire page.
    It is necessary to delete only Part 1 of Schedule A (Revisions 2006 through 2010) or page 1 Schedule A (Revision 2011) Place a "/" only through Part 1 of Schedule A (Revisions 2006 through 2010 or page 1 Schedule A (Revision 2011)
    It is necessary to delete only Part 2 of Schedule A, (Revisions 2006 through 2010) or page 1 Schedule A (Revision 2011) Place a "/" only through Part 2 of Schedule A (Revisions 2006 through 2010 or page 1 Schedule A (Revision 2011) .
    Schedule A is not attached, but the return or attachments indicate that it is a multi-state filer, 1. Attach Schedule A and check the appropriate state boxes.

    2. Mark Box "1b" , if it is not marked.

    3. Enter an asterisk (*) to delete the state code in Box "1a" . if it is present.

    4. If the state shown in Box "1a" is not marked on Schedule A, mark the appropriate box.
    Box "1a" is blank, or contains a valid state code and Schedule A is attached, 1. If the state shown in Box "1a" is the only state checked on Schedule A, delete the state code on Schedule A.

    2. If Box "1a" is blank:

    a. Edit the state code from Schedule A to Box "1a" .

    b. Delete the state code on Schedule A.

    3. If multi-states are shown on Schedule A:

    a. Delete Box "1a" .

    b. Mark Box "1b" .

    c. Check the state shown in Box "1a" on Schedule A, if it is not checked.
    Box "1b" is marked and Schedule A is not attached, 1. Examine the return and attachments.

    2. If no states are listed:

    a. Edit the valid state code from the entity section of the return to Box "1a" .

    b. Delete Box "1b" .

    3. If multi-states are shown on an attachment, edit to Schedule A.

    4. If unable to determine a valid state code, leave blank.
    Box "1a" contains a valid state code and Box "1b" is blank or checked, 1. If the state shown in Box "1a" is the only state checked on Schedule A:

    a. Delete the state code on Schedule A.

    b. Delete the entry in Box "1b" , if it is checked.

    2. If multi-states are shown on Schedule A:

    a. Delete Box " 1a" .

    b. Check the state shown in Box "1a" on Schedule A, if it is not checked.

    c. Check Box 1b, if it is not checked.

    3. If Schedule A is not attached, but the return or attachments indicate that it is a multi-state filer:

    a. Attach Schedule A and check the appropriate state boxes.

    b. Delete the state code in Box "1a" .

    c. Check the state shown in Box "1a" on Schedule A, if it is not checked.

    d. Check Box 1b, if it is not checked.

    There is no entry in Box "1a" or Box " 1b" . 1. Examine the return and attachments.

    2. If no states are listed, edit the valid state code from the entity section of the return to Box "1a" .

    3. If multi-states are shown on Schedule A:

    a. Mark Box "1b" .

    b. If multi-states are shown on an attachment, edit to Schedule A and mark Box "1b" .

    4. If unable to determine a valid state code, leave blank.

3.11.154.6.10.2  (01-01-2012)
Part 2 of Schedule A of Form 940/940-PR (Revisions through 2011) - Credit Reduction Information

  1. Part 2 of Schedule A of the redesigned form (Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) should be completed if wages were paid in a state that was subject to credit reduction. Exhibit 3.11.154-1 and Exhibit 3.11.154-2. Exhibit 3.11.154-19 for Credit Reduction Years, States and Rates.

    Note:

    Do not edit Credit Reduction information on Early-Filed returns

  2. If Part 2 of Schedule A is completed (Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011), Box "2" on Form 940 "must" be checked.

    Note:

    If Credit Reduction does not apply for a particular year, Part 2 of Schedule A will be shaded out (Revisions 2006 through 2010), or will have a notation imprinted in Part 2 stating that it is not applicable for that year.

    IF THEN
    The taxpayer has attached Schedule A to report wages paid in a state subject to credit reduction, Part 2 of Schedule A should be completed Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) Box "2" of Form 940 should be checked.
    Credit Reduction applies, Mark Box "2" on Form 940, if the taxpayer has not already checked it.
    Schedule A is attached but Part 2 (Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) is not completed and the state code shown on Form 940, Box "1a" is a credit reduction state, 1. Mark Box "2" on Form 940, if the taxpayer has not already checked it.

    2. Enter the amount from Line 7a of Form 940 (Total FUTA Wages) to the appropriate line in Part 2 of Schedule A Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) The state shown in Part 2 of Schedule A (Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) will be the same as the state entered on Form 940, Box "1a" .

    3. Edit the total from Part 2, Line 3 of Schedule A (Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) to Part 3, Line 11 of Form 940. Do not enter the total on Line 11 if there is an entry on Line 9.
    Schedule A is not attached or Part 2( Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011) is not completed and the taxpayer has marked Box "1b" of Form 940, 1. Examine the return and attachments.

    2. If able to determine the amount of wages paid to the state subject to credit reduction, edit the information to the appropriate line in Part 2 of Schedule A (Revisions 2006 through 2010) or page 1, Schedule A (Revision 2011)

    3. Mark Box "2" on Form 940, if the taxpayer has not already checked it.

    4. If unable to determine the credit reduction wage or state information, correspond.

3.11.154.7  (01-01-2012)
Form 940- Revision 2005 and Prior

  1. General guidelines for editing returns: Exhibit 3.11.154-3.

3.11.154.7.1  (01-01-2012)
Form 940, - Editing the "A" , " B" , "C" , "D" Indicator Questions (Revision 2005 and Prior)

  1. We will no longer edit the ABCD Indicator Code. No action is necessary.

3.11.154.7.2  (01-01-2012)
Form 940 - Part I - Computation of Taxable Wages (Revision 2005 and Prior)

  1. Form 940 - Part I should be completed by all filers. If Part I does not contain sufficient information to determine Line 5, Total taxable wages, correspond .

    Exception:

    It is not necessary to correspond to obtain Part I information from the taxpayer when they indicate "not liable" , zero, dash, all blank entries or " final return" and the return has been signed. We should consider taxpayer intent.

3.11.154.7.2.1  (01-01-2012)
Form 940 - Part I, Line 1 (Revision 2005 and Prior)

  1. Form 940 - Part I, Line 1 - Total Payments for Services of Employees

    1. On some Form 940 returns, the taxpayer may enter the same amount to Line(s) 1 and 3. (Line 1 entries cannot be the same as Line 3 entries).

    2. If Part I, Line 1 and Line 3 have the same line entries, send a 142C Letter to the taxpayer for the correct Line 3 entry.

    3. If the taxpayer does not respond, disallow the entry on Line 3. Bring the amount from Line 1 to Line 5, making a balance due return.

3.11.154.7.2.2  (01-01-2012)
Form 940- Part I, Line 2, Exempt Payments (Revision 2005 and Prior)

  1. Form 940 - Part 1, Line 2, Exempt Payments:

    IF THEN
    There is an entry on Part 1, Line 2, Accept the taxpayer's figure on Line 2.
    No explanation is provided by the taxpayer on Line 2, No action is necessary. Do not correspond with the taxpayer for an explanation.
    Line 2, 3, and 4 are identical, Consider them as misplaced entries and correspond for the correct line entries.

3.11.154.7.2.3  (01-01-2012)
Form 940 - Part I, Line 3, Excess Payment (Revision 2005 and Prior)

  1. Form 940 - Part 1, Line 3, Excess Payment:

    IF THEN
    The taxpayer enters the same amount on Line 1 and Line 3, Send a 142C Letter to the taxpayer for the correct Line 3 entry.
    The taxpayer does not respond, Disallow the entry on Line 3. Bring the amount from Line 1 to Line 5, making the return taxable.

3.11.154.7.2.4  (01-01-2012)
Form 940 - Part I, Line 4, Total Exempt Payments (Revision 2005 and Prior)

  1. Form 940 - Part 1, Line 4, Total Exempt Payments:

    1. The taxpayer has an entry on Line 4, Total Exempt Payments.

    IF THEN
    There is no entry in Part I, Lines 2 and Line 3, No action is necessary. Accept taxpayer's entry on Line 4. Do not correspond.
    Line 4 is greater than Part I, Line 1, Correspond for the correct amounts (total exempt payments cannot exceed total payments).
    No reply, 1. asterisk (*) to the left of the taxpayer's entry on Line 4, and Line 5.
    2. Edit amount on Line 1 to Line 5 making the return taxable.

3.11.154.7.2.5  (01-01-2012)
Form 940 - Part I, Line 5, Total Taxable Wages (Revision 2005 and Prior)

  1. Form 940 - Part 1, Line 5, Total Taxable Wages:

    1. IF THEN
      If there is an entry on Line 1 (Total Payments) and Lines 2 through 5 show a significant entry such as a "0" (zero), dash"-" or the word "None" written on the line, Edit the amount from Line 1 to Line 5 or compute and enter Line 1 less Line 4.
      There is an entry on Part II, Line 7, Determine the wages by dividing this amount by .008.
      Line 1 and Line 5 have no entries, Correspond to obtain the total taxable wages.
      Line 5 is blank or zero because Line 3 equals Line 1, Correspond to obtain the total taxable wages.

3.11.154.7.2.6  (01-01-2012)
Form 940 - Part I, Line 6, Credit Reduction (Revision 2005 and Prior)

  1. Exhibit 3.11.154-12 for a list of valid state codes. Exhibit 3.11.154-19 for a credit reduction states, years and rates.

  2. Line 6, Credit Reduction, is present on tax years 1974, 1976 through 1987, 1991, 1992, 2004, and 2005 returns.

  3. Watch for misplaced entries in Part I, Line 6.

    1. These instructions are applicable only for 1974, 1976 through 1987, 1991, 1992, 2004 and 2005 Tax Year returns.

      Note:

      Do not edit Credit Reduction information on Early-Filed returns.

      IF THEN
      The return is taxable and the taxpayer pays wages in a single state that is subject to credit reduction , 1. The state code and credit reduction wages must be perfected.
      2. Edit the state code and wage amount to Form 4975.
      The return is taxable and the taxpayer pays wages in more than one state, and one of those states is subject to credit reduction, Edit the state code and wage Amount shown on Part I, Line 6 to Form 4975. Also edit all states shown in Part II, Line 3(a) to Form 4975. Exhibit 3.11.154-3
      The single state shown on the return is subject to credit reduction and Part I, Line 5 and Line 6 are the same, Multiply the entry on Part I, Line 5 by the credit reduction factor and perfect the amount. Edit the state code and wage amount to Form 4975.
      If the single state shown on the return is subject to Credit Reduction and there is no entry on Part I, Line 6, Multiply the amount on Part I, Line 5 by the credit reduction factor and perfect the amount. Edit the state code and wage amount to Form 4975.
      The single state shown on the return is subject to Credit Reduction and Part I, Line 5 and Line 7 are the same, Edit the state code and wage amount to Form 4975.
      The taxpayer has entered the credit reduction amount but left the wage amount blank, Divide the credit reduction amount by the factor and perfect the wage amount. Edit the state code and wage amount to Form 4975.
      The taxpayer claims credit reduction in Part I, Line 6, or Part I, Line 7, and the return clearly indicates that the taxpayer did not pay wages in a Credit Reduction State, Asterisk (*) to the left of the entry.
      The taxpayer is a multi-state filer, and Part I, Line 5 and Line 7 are the same, Correspond for correct credit reduction wage amount and correct credit reduction amount.
      The taxpayer is a multi-state filer, and you cannot determine the credit reduction wage amount from the return or attachments, Correspond for correct credit reduction wage amount and correct credit reduction amount.

3.11.154.7.2.7  (01-01-2012)
Form 940- Part I, Line 7, Total Credit Reduction (Revision 2005 )

  1. Line 7 is present on Form 940 for Tax Year 2005 only.

  2. Credit Reduction applies to tax years 1974, 1976 through 1987, 1991, 1992, 2004 and 2005. Instructions in this section are applicable for credit reduction years 1974, 1976 through 1987, 1991, 1992, 2004, 2005, 2009, 2010 and 2011 returns..

    Note:

    Do not edit Credit Reduction information on Early-Filed returns.

  3. Watch for misplaced entries in Part I, Line 6. If the taxpayer claims credit reduction for a State and the return clearly indicates that the taxpayer did not pay wages in that State, asterisk (*) to the left of the entry.

  4. If wages appear on Part I, Line 6 but no credit reduction State is involved, Asterisk (*) to the left of the wage amount on Line 6.

  5. Line 7 is present on Form 940 for tax year 200512.

    IF THEN
    The taxpayer pays wages in a single state that is subject to credit reduction and Part I, Line 7 is blank, Edit the amount from Part I, Line 6, Form 4975 and underline the appropriate state code.
    The taxpayer pays wages in multiple states and you are unable to determine the Total Credit Reduction amount from the return or attachments, Correspond.
    The taxpayer has an entry on Part I, Line 7, but it is clear from the return or attachments that the taxpayer has not paid wages in a Credit Reduction state, Asterisk (*) to the left of the entry.

3.11.154.7.3  (01-01-2012)
Form 940 - Part II (Revision 2005 and Prior)

  1. This section contains instructions for Form 940, Part II.

3.11.154.7.3.1  (01-01-2012)
Form 940- Part II, Line 3(a), Name of State (Revision 2005 and Prior)

  1. ISRP will transcribe one to five valid state codes that are shown in Part II, Line 3, Column (a).

  2. If the state name is written out in its entirety, or shown in a format other than as a valid state code, edit the correct two character state code.

  3. If more than five state codes are present on the return or attachments, underline the applicable state codes on Form 4975.

  4. If a state code is shown in Part I, Line 6 (Revision 2004 and Revision 2005), underline the applicable state code on Form 4975, and edit the credit reduction wages. Also edit any states shown in Part II, Line 3(a) to Form 4975 also if there is an entry on Line 6, Part 1.

  5. Valid state codes, for purposes of unemployment tax, include all fifty states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Exhibit 3.11.154-12 for valid state codes and abbreviations.

  6. "G" coded returns (Amended) are not edited.

  7. When processing a non - taxable return from a credit reduction state, edit a "ZZ" State Code to Part II, Line 3(a).

  8. If the State Code is missing or illegible, edit the State used in the entity section of the return to Part II, Line 3(a).

  9. Edit a State Code only once, even if the taxpayer has entered it more than once.

  10. Do not edit any data listed for foreign countries including:

    • American Samoa

    • Federated States of Micronesia

    • Guam

    • Marshall Islands

    • Northern Mariana Islands

    • Palau

    Note:

    Only Puerto Rico and U.S. Virgin Islands will be edited to Part II, Line 3(a) or Form 4975.

3.11.154.7.3.2  (01-01-2012)
Form 940- Part II, Line 3 Column (b), State Reporting Numbers (Revision 2005 and Prior)

  1. Form 940 - Part II, Line 3, column (b), State Reporting Number(s) will no longer be edited. No action is necessary.

3.11.154.7.3.3  (01-01-2012)
Form 940- Part II, Line 3b, Total Tentative Credit (Revision 2005 and Prior)

  1. Line 3(b), Total Tentative Credit, will no longer be transcribed. No action will be necessary.

    Note:

    Any reduction in credit because of late payments made to the State will be determined by the FUTA State Certification Program after initial processing of the Form 940 return.

3.11.154.7.3.4  (01-01-2012)
Form 940 - Part II, Line 7 Total FUTA Tax (Revision 2005 and Prior)

  1. Form 940 - Part II, Line 7, Total FUTA Tax

    1. If this line is blank or illegible, perfect it from the return or attachments if possible.

    2. Do not compute the Gross FUTA tax, Line 1 of Part II or the Maximum Credit, Line 2 of Part II, in order to perfect Line 7.

    3. If Lines 1, 2 and 6 of Part II have been completed by the taxpayer or perfected from information on this return, perfect Line 7, by subtracting Line 6 from the amount on Line 1, Part II.

    4. If the entry is a negative number, asterisk (*) to the left of the entry.

3.11.154.7.3.5  (01-01-2012)
Form 940 Part II, Line 8, Total FUTA Federal Tax Deposit (Revision 2005 and Prior)

  1. Form 940 - Part II, Line 8, Total FUTA FTD

    1. If you cannot perfect this line from the return or attachments, leave it blank.

    2. If the entry is a negative number, asterisk (*) to the left of the entry.

3.11.154.7.3.6  (01-01-2012)
Form 940, Part II, Line 9, Balance Due/Line 10, Overpayment (Revision 2005 and Prior)

  1. Form 940 - Part II, Line 9, Balance Due / Line 10, Overpayment

    1. If these lines are blank or illegible, perfect from the return or attachments if possible.

    2. Perfect the Balance Due/Overpayment by subtracting Line 8 from Line 7.

      IF THEN
      The Balance Due amount on Line 9 contains Failure to Deposit (FTD), Failure to File (FTF), or Failure to Pay (FTP) penalty and/or interest, 1. Edit an asterisk (*) to the left of the Line 9 amount.

      2. Subtract the FTD, FTF, FTP penalty and interest from the Balance Due amount.

      3. Edit the Balance Due amount to the left of the asterisk (*).

      4. Edit a Received Date, if necessary.
      The Overpayment Amount on Line 10 is reduced by FTD, FTF, FTP penalty and/or interest, 1. Edit an asterisk (*) to the left of the Line 10 amount.

      2. Add the FTD, FTF, FTP penalty and interest to the Overpayment amount.

      3. Edit the Overpayment amount to the left of the asterisk (*) .

      4. Edit a Received Date, if necessary.

    3. If the taxpayer has entered the same amount in Part II, Lines 7, 8 and 9, and the amount equals the total of the ROFTL in Part III or the ROFTL is blank, Asterisk (*) to the left of the entry on Line 8.

    4. Do not edit if the computation on Line 9 or 10 is less than ≡ ≡ ≡ ≡ .


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