QuickBooks Form 940 Interview: What Each Prompt Means
QuickBooks walks employers through a Form 940 interview sheet before opening the return — here is what each question covers and how to answer it.
When you open Form 940 in QuickBooks, the software does not drop you straight onto the form. It first presents an interview sheet — a series of questions designed to gather the information needed to populate the return correctly. For employers unfamiliar with the prompts, the interview can raise more questions than it answers, particularly around credit reduction states, amended returns, and successor employer status.
The Interview Screen
The interview collects details that QuickBooks uses to complete Form 940, along with Form 940V, Schedule A, and the Computation of State Unemployment Credit Adjustment Worksheet. The questions cover several distinct scenarios, each tied to a checkbox or picklist on the screen.
Schedule A and Credit Reduction States
Schedule A applies in two situations: when an employer pays state unemployment insurance (SUI) tax to more than one state, and when an employer is subject to FUTA credit reduction.
Credit reduction applies to states that have not repaid money borrowed from the federal government to pay unemployment benefits. The Department of Labor determines which states fall into this category. An employer is subject to credit reduction if they paid FUTA-taxable wages that were also subject to state unemployment taxes in any listed state with a credit reduction rate greater than zero. The result is additional federal unemployment tax owed when filing Form 940, calculated using Schedule A.
For the 2012 filing year, wages subject to unemployment compensation laws in Arkansas, Arizona, California, Connecticut, Delaware, Florida, Georgia, Indiana, Kentucky, Missouri, North Carolina, New Jersey, Nevada, New York, Ohio, Rhode Island, the Virgin Islands, Vermont, and Wisconsin were subject to credit reduction. The IRS published a FAQ page on FUTA Credit Reduction that links to the Department of Labor’s list of final credit reduction states, available through the IRS website by searching for that term.
Amended Returns
If you are filing an amended return to correct a previously filed one, you check the amended return box. QuickBooks cannot e-file amended returns — you will need to paper file.
Successor Employer
The successor employer checkbox applies when an employer is reporting wages paid before acquiring the business from a predecessor who was subject to FUTA tax, or when the employer is claiming a special credit for state unemployment tax paid by that predecessor before the acquisition.
A successor employer is one who acquires substantially all the property used in a trade or business of another person — or a separate unit of that business — and, immediately after the acquisition, employs one or more individuals who were employed by the predecessor.
No Payments to Employees
If the employer made no payments to employees during the year and is therefore not liable for FUTA tax, checking this box indicates that on the return.
Final Return
If the business closed or stopped paying wages, checking this box marks the filing as a final return.
Single-State vs. Multi-State Employers
For single-state employers, the interview provides a picklist to select the state where the employer is required to pay state unemployment tax. Multi-state employers check the multi-state box instead, which routes the return through Schedule A.
Credit Reduction Checkbox
A separate credit reduction checkbox appears on the interview screen for employers who paid wages in a state subject to FUTA credit reduction. Checking this box ensures QuickBooks includes the Schedule A calculation in the return.
What to Take Away
The Form 940 interview in QuickBooks is straightforward once you understand what each prompt is asking. Most single-state employers with no credit reduction issues will move through it quickly. The complexity arrives with multi-state operations, credit reduction states, and successor employer situations — all of which trigger additional worksheets or schedules that QuickBooks generates based on your answers.