Certified Payroll Professional Practice Exam

What does Form 940 report for employers?

1. Wages paid by quarter

2. Unemployment tax liability

3. Social Security contributions

4. Employee benefits

The correct answer is: Unemployment tax liability

Form 940 is used by employers to report their annual Federal Unemployment Tax Act (FUTA) tax liability. FUTA is a federal law that requires employers to pay into a fund that provides unemployment compensation to workers who have lost their jobs. This tax is separate from the state unemployment taxes that employers are also required to pay. Therefore, the correct answer is B, Unemployment tax liability. The other options are incorrect because: A. Wages paid by quarter are typically reported on Form 941 for federal income tax withholding, Social Security, and Medicare taxes. C. Social Security contributions are reported on Form W-2 for each employee and are also reported on Form 941. D. Employee benefits are not typically reported on Form 940, as this form specifically relates to the employer's federal unemployment tax liability.