What is Form 940 and Who need it?
Form 940 is an informational form that entities file to report the income and expenses of their employees. The form is also known as the U.S. Employee Withholding Tax Return Form.
Form 940 is an informational return required by the Internal Revenue Service (IRS). The form is used by employers to report the earnings of their employees and any wages, tips, and expenses paid to their employees. The form is used to avoid underpayment of tax withholding.
Any employer with employees must pay unemployment taxes using Form 940. Federal unemployment tax, in tandem with state unemployment tax, is used to compensate unemployed workers who have been laid off through no fault of their own and are actively looking for work.
Why are Form 940s necessary?
The answer lies in the fact that they help to ensure that businesses are properly paying their share of taxes. By requiring businesses to complete these forms, the IRS is able to keep track of how much tax each business owes. This information is then used to determine whether or not a business is paying its fair share of taxes. In addition, the information collected on Form 940s is also used to help the IRS detect and investigate cases of tax fraud.