Florida General Contractor Practice Exam

What is the form used to report and pay annual federal unemployment taxes?

1. Form 940

2. Form 941

3. Form 1099

4. Form W-2

The correct answer is: Form 940

Form 940 is the correct form used to report and pay annual federal unemployment taxes. This form is specifically designed for employers to report their annual Federal Unemployment Tax Act (FUTA) liability. Employers are required to file Form 940 once a year, and it includes details about the wages paid, the amount of FUTA tax owed, and any adjustments needed based on previous payments. Form 941, on the other hand, is used for reporting quarterly federal payroll taxes, which include income tax withheld from employee wages and both the employer and employee portions of Social Security and Medicare taxes. Form 1099 serves a different purpose; it is generally used to report various types of income other than wages, salaries, and tips, such as freelance income or interest payments. Finally, Form W-2 is utilized to report wages paid to employees and taxes withheld from their paychecks, providing important information to both the IRS and the employee for income tax purposes. Understanding the specific uses of these forms is crucial for compliance with federal tax law and for effectively managing payroll responsibilities as a contractor.