As an employer, you may have to file a federal unemployment tax return for 1996 on Form 940 or Form 940-EZ. You will have to do this for other than agricultural or household employees if either:

1.You paid $1,500 or more in wages during any calendar quarter in 1995 or 1996; or

2.You had at least one employee work for some part of a day in any twenty different weeks in 1995 or 1996.

You will generally file Schedule H (Form 1040) for household employees if you paid them cash wages of $1,000 or more in any calendar quarter of 1995 or 1996 for household work in your private home.

However, Form 940 or 940-EZ must be filed if you paid cash wages of $1,000 or more in any calendar quarter in 1995 or 1996 for household work in a local college club or a local chapter of a college fraternity or sorority.

You will have to do this for farm workers if either:

1.You paid cash wages of $20,000 or more in any calendar quarter in 1995 or 1996, or

2.You had 10 or more farm workers during some part of a day for at least one day during any 20 different weeks in 1995 or 1996.

The gross federal unemployment tax rate for 1996 is 6.2% and is figured on the first $7,000 of wages you paid each employee in 1996. However, if you have timely paid state unemployment contributions on the same wages, you are given a credit of up to 5.4%. The tax rate after the credit is .8%

If you do not pay state unemployment contributions on time, your credit for the late contributions is limited to 90% of the amount you would have been allowed if paid on time. Employers in some states do not get the full credit because of special rules in the federal law. If there are any such states in 1996, the states and the amount by which the employer's credits must be reduced will be listed in Part I of Form 940. Be sure to check and see if your state is listed. If so, follow the instructions on the form to make the necessary computations in Part I.

You may be able to file Form 940-EZ, a simplified Federal unemployment tax return, if you meet four tests:

1.You made state unemployment contributions to only one state;

2.You paid all your state contributions by January 31, 1996;

3.None of the wages you paid were paid in a credit reduction state; and

4.All of your federal unemployment tax wages were also taxable for your state's unemployment tax.

The due date for the 1996 Form 940 or 940-EZ is January 31, 1997. However, if you deposited all taxes when due, you may file on or before February 10, 1997. For more information, refer to Publication 15, Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide. Forms and publications can be ordered by calling 1-800-829-3676. For information on deposit rules, refer to Topic 759.

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