IRS Form 940-B – IRS Form 940-B, officially titled “Request for Verification of Credit Information Shown on Form 940,” plays a crucial role in ensuring the accuracy of credits claimed under the Federal Unemployment Tax Act (FUTA). This form is used to verify state unemployment contributions reported on Form 940, the Employer’s Annual Federal Unemployment (FUTA) Tax Return. By confirming that payments were made to the appropriate state unemployment funds, it helps prevent errors in tax credits and supports the integrity of the unemployment tax system. Employers and IRS personnel may encounter this form in specific scenarios where manual verification is required.
If you’re an employer dealing with FUTA taxes or facing an audit related to unemployment credits, understanding Form 940-B can save time and avoid penalties. In this SEO-optimized guide, we’ll cover its purpose, when it’s needed, how to use it, and key procedures, drawing from official IRS sources.
What Is IRS Form 940-B?
Form 940-B is a specialized IRS document designed for verifying credit information related to state unemployment taxes as reported on Form 940. It is part of the FUTA Certification Program, which involves collaboration between the IRS and state agencies (including all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands).
Key elements of the form include:
- Employer Details: Name, address, employer identification number (EIN), calendar year, and date.
- Verification Table: Columns for state where services were performed, state reporting number, taxable payroll, experience rate period and rate, and contributions paid (broken down by periods: before February 1, February 1-10, and after February 10).
- State Certification Section: Where the state agency confirms or notes discrepancies in the data, certifies payments, and provides contact information for submission back to the IRS.
The form is revised as of May 2010 and available for download as a PDF from the IRS website: https://www.irs.gov/pub/irs-pdf/f940b.pdf. It consists of two parts: one for the state agency and a suspense/case file copy.
Purpose of Form 940-B
The primary purpose of Form 940-B is to request manual certification from state agencies to confirm that an employer’s reported state unemployment contributions were indeed paid into the state fund. This verification is essential for validating the credits claimed against FUTA taxes on Form 940 or Schedule H (Form 1040 for household employers).
Under FUTA, employers can receive up to a 5.4% credit against the 6.0% federal tax rate for timely state unemployment taxes paid, reducing the effective FUTA rate to 0.6%. Form 940-B ensures these credits are legitimate by cross-checking with state records, helping to identify discrepancies in taxable payroll, experience rates, or payment timings.
This form supports the broader FUTA system, which funds unemployment benefits alongside state programs. It’s particularly important in cases where automated verification isn’t sufficient or when there’s a risk of credit reduction due to late payments or state-specific issues.
When Is Form 940-B Required?
Form 940-B is not a routine filing like Form 940. It’s used in targeted situations where manual verification is necessary. According to IRS internal procedures, key triggers include:
- IRC 6020(b) Assessments: When the IRS prepares a return on behalf of the taxpayer (substitute for return) and the taxpayer claims a tax rate below 6.0%.
- Zero Returns with Wages: If a Form 940 shows zero tax but reports wages.
- Credit Adjustments or Audits: During IRS processing of Form 940 claims where state contributions need confirmation, especially if payments were late or excluded.
- Multiple States Involved: For employers operating in multiple states, verification may be required for each.
Employers might also use the form proactively if they anticipate scrutiny or need to support a claim for reduced FUTA rates. However, it’s often initiated by the IRS during return processing.
How to Use and Submit Form 940-B
Step-by-Step Process for Employers
- Download the Form: Obtain the latest version from the IRS website (linked above).
- Fill Out Employer Sections: Provide your details and the credit information as shown on your filed Form 940.
- Send to State Agency: Submit the form to the relevant state unemployment agency for certification. Include any supporting documents like contribution returns.
- State Certification: The state will verify the data, note any differences, and certify the contributions. They may indicate if payments were made after key dates (e.g., February 1), which could affect credits.
- Submit to IRS: Once certified, fax or mail the form to the IRS as instructed (typically to the Director of the Internal Revenue Service Center).
IRS Procedures for Processing
IRS personnel, particularly FUTA liaisons, handle Form 940-B as follows:
- Initial Request: Allow 30 days for state response.
- Follow-Ups: Second request after 30 days (14-day response time), followed by phone contact if needed.
- No Response Handling: After multiple attempts (up to 60 days), notate as “No Response” and proceed without adjustment, informing the taxpayer via Letter 380C.
- Adjustments: If certified, recalculate taxes using Form 940 worksheets; adjust returns and notify taxpayers of changes.
Note: The IRS cannot accept emailed certifications for security reasons; fax or mail is preferred.
Common Issues and Tips for Compliance
- Discrepancies: If state records differ from your Form 940, it could lead to credit reductions or additional taxes. Always keep accurate records of state payments.
- Timely Payments: Contributions paid after January 31 may reduce credits unless made by February 10 (for e-filed returns).
- Multi-State Employers: Complete separate verifications for each state if required.
- Exemptions: Certain organizations (e.g., nonprofits exempt under 501(c)(3)) may not need FUTA but could still interact with related forms.
To avoid issues, consult IRS Publication 15 (Circular E) for FUTA guidance and consider using tax software for accurate Form 940 filings.
Conclusion
IRS Form 940-B is an essential tool for verifying FUTA credits, ensuring employers receive the correct reductions based on state contributions. While not commonly filed by all businesses, it’s vital in audit or adjustment scenarios. For the most current information, always refer to official IRS resources. If you need to download the form, visit https://www.irs.gov/pub/irs-pdf/f940b.pdf.
If you’re unsure about your specific situation, consult a tax professional or contact the IRS directly. Staying compliant with FUTA requirements helps support the unemployment system while minimizing your tax liability.