Form 940 (Schedule R) is an additional schedule that needs to be completed by employers who have paid wages in a state that requires them to withhold state unemployment tax. Generally, if an employer is subject to state unemployment tax in a particular state, they need to complete Schedule R along with their Form 940.
Here are some relevant points to consider about Schedule R:
1. State Unemployment Tax: Schedule R is used to report the additional credit allowed for state unemployment taxes paid. This credit reduces the employer's federal unemployment tax liability.
2. State Withholding Requirement: Employers should determine whether they are required to withhold state unemployment taxes. Each state may have its own threshold or criteria for employers to comply with, so it is important to review the specific regulations of the state where the employer operates.
3. State-Specific Information: Schedule R requires employers to provide detailed information about their state unemployment tax payments. This includes the state's name, employer identification number (EIN) used for state unemployment tax purposes, the amount of wages subject to state unemployment tax, and the amount of state unemployment tax paid.
4. Separate Filing: If an employer operates in multiple states and has paid state unemployment tax in more than one state, they must complete a separate Schedule R for each state.
5. Coordinated Filing: If an employer participates in the optional "agent filing program" offered by some states, they should not complete Schedule R. Instead, the agent or third-party filer responsible for the state unemployment tax filings will handle it.
6. Record Keeping: Employers must retain their records related to state unemployment taxes and credits claimed on Schedule R. These records should be kept for at least four years from the due date or the date the tax was paid (whichever is later).
Remember, it is essential to consult the official instructions provided by the IRS when completing Form 940 and Schedule R. The instructions provide step-by-step guidance and specific details based on your situation.