3.3   940 Certification - Annual - Overview

[ 3.3.1   940 Certification - Annual - Federal Schedule][3.3.2   940 Certification - Annual - State Schedule]

The Federal 940 Report is filed by employers each year and covers the period January 1 through December 31. The 940 report is due on or before January 31 following the close of the reporting year. The 940-report form does not take the place of the Schedule H, household Employment Tax filing procedures.

The Federal Unemployment Tax Act (FUTA) provides for the cooperation between state and federal governments in establishing and administration of unemployment insurance. The employer is subject to payroll taxes levied by both the federal and state governments. The IRS is responsible for receiving and processing the Form 940 and the Schedule H.

The computerized FUTA Certification Program is the method the IRS uses to verify with the states that a credit claimed on the Form 940 or Schedule H, was actually paid into the states unemployment funds. Changes to IRS procedures are made each year and require that TWC staff always review IRS Document 6581 detailing those procedures.

It is necessary to post all payments for all four quarterly state returns, plus any supplemental payments received before certifying the credits. Cut off for posting should not be made more than three weeks prior to sending IRS the data. For the purpose of determining timely payments, use the date payments were received, not the date of deposit or posted to our data base.

3.3.1    940 Certification - Annual - Federal Schedule

The federal schedule is flexible and the following timeline is an approximation.

September:	IRS creates a magnetic tape from data on the Form 940 or Schedule H to send to each state.
October:	The IRS transmits the FUTA Identification Data Tape to the states.The FUTA ID Data tapes will include entities extracted from all Form 940 and Schedule H that posted to the IRS business and Individual Master File between October 1, of the prior year and September 30 of the reporting year.
January 31:	Each State must have submitted their FUTA Certifications.
February	IRS validates and processes valid state FUTA Certifications.IRS returns invalid certification data tapes.
April	States must have their correct certification data to IRS in order to participate in the annual FUTA program processing.
May	IRS gives their staff the discrepancy data tapes for processing.

3.3.2    940 Certification - Annual - State Schedule

The state schedule is flexible, depends upon the IRS, therefore the following timeline is an approximation

In October the tapes are received from the IRS, If they are not received the Tax department or Data Processing need to contact the individual responsible as stated in IRS Document 6581.
Data Processing ensures that the tapes are readable.
Tax Department receives a copy of the updated IRS Document 6581, and reviews it to determine if we need to update any procedures.
Data Processing will copy the tapes and return the original tapes to the IRS. State tapes will be returned upon completion of IRS processing. All tapes (IRS copy and the back-up copy of the state tape) should be retained for one year.
Use FedEx or UPS for tracking purposes.
Data Processing will prepare the transmittal letter IAW as the shown in IRS Document 6581. The shipping address will also be provided in Document 6581. The Tax Department will maintain a copy.
The tax Department will mail the 100 validated records and the Forms 940-C to the appropriate SBSE.

After the FUTA Certification Data Tape has been prepared and before the tape is shipped, Tax will obtain two printed copies of the first 50 Zero-Certification Records (records where the total state wages are zero) and the first 50 non-Zero-Certification records (records where the total state wages are other than zero). Tax will verify the format and components of these records against the IRS Document 6581 specifications.

Using the FEIN's or the TWC Tax Account Number of these 100 records, the Tax Department will request hard copies of these certifications. Upon receipt, Tax will review the hard copy to verify the computer certification. When the results are satisfactory, one copy of the paper certification is shipped to the IRS, the other copy will be maintained in the Tax Department for future references. (State audit check)

IRS Document 6581 is the reference for procedures concerning Federal Employer Identification Number (FEIN).

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