Annual 940 FUTA

Classification is Fringe Benefits

Aloha, Kim! Thank you for providing additional details about the imbalance of your 940 FUTA-exempt payments. I know how vital it is to have the correct amounts, particularly when filing your returns, and I’m here to support you every step of the way. Together, we’ll get to the bottom of this and ensure your taxes are accurate. 

Since you’ve identified the reason for the error, it seems that the fringe benefit payroll item is exempt from Federal Unemployment, but configured in QuickBooks to calculate it. To fix this, you'll need to modify the tax tracking type or Federal Unemployment tax on the payroll item that should be exempt from FUTA. Here’s a step-by-step guide to make the process easier for you:

1. Go to Lists and select Payroll Item List.
2. Right-click the payroll item, and pick Edit Payroll Item.
3. Hit Next until you get to the Tax Tracking Type section.
4. Make sure the tax tracking type chosen matches the payroll item used. Don’t use tax tracking type Other.
   • If the tax tracking type is correct, go to Step 5.
   • If the tax tracking type is incorrect, select the correct one, then select Next twice, then Finish. After that, fix your employee wages. 
5. Click Next.
6. From the Taxes window, review the Federal Unemployment tax. If Federal Unemployment is unchecked, check it. Otherwise, uncheck it if it's checked. Or hit the Default button to revert to QBDT automatic settings. 
7. Select Next, then Finish. 

Once finished, correct the FUTA wages for each employee who had the incorrect payroll item used on their paychecks. Follow the sequence below to complete the procedure.

1. Create and save a backup of your company file.
2. Run a payroll checkup.
3. If the second method didn't work, you’ll need to create manual wage base adjustments for each employee who had the incorrect payroll item.

You can find more insight about the task above in this article: Troubleshoot Part 2 on Form 940 in QuickBooks Desktop Payroll.

Additionally, I encourage you to take a look at this article for valuable insights on effectively preparing your tax forms and ensuring you meet all requirements and deadlines for your year-end tasks: Checklist for QuickBooks Desktop Payroll. You’ll find it really helpful!

I’m dedicated to delivering tailored solutions that perfectly fit your payroll needs, particularly regarding your 940 FUTA payments. Don't hesitate to reach out if you need support or have any questions, Kim. Wishing you a fantastic day ahead, and I look forward to helping you!