The FUTA program provides for cooperation between state and federal governments in the establishment and administration of unemployment insurance. Under this dual system, the employer is subject to a payroll tax levied by the federal and state government. The taxpayer is allowed a maximum credit of 5.4 percent against the Federal tax of 6.0 percent, provided that all payments were made to the state by the due date. Employers whose payments are received by the state after the due date are allowed 90 percent of the credit that would have been allowed had the payments been made on time. As a result of FUTA, IRS is responsible for receiving and processing the Form 940 and or/or Schedule H. All revenue that is associated with these tax returns is turned over to the Department of Labor (DOL). DOL is responsible for dispensing the revenue deposited in the FUTA Trust Fund. DOL is charged with monitoring the Unemployment Insurance Systems for each state and can withhold funds from a state if the state does not comply with Federal standards.

The authority for the procedures of FUTA can be found under Title 26, Subtitle C, Chapter 23 of the Internal Revenue Code (Section 3301 through Section 3311).

The Director, SB/SE, Exam Field and Campus Policy is responsible for the Federal Unemployment Tax Act (FUTA) program.

Management officials are responsible for:

This program is monitored through the FUTA Case Processing System (FCP) located on the Consolidated Annual Tax Reporting System (CATRS).

Below is list of acronyms and their definitions:

IRM 1.4.23, FUTA Manager and Coordinator Guide.

IRM 4.19.23, FUTA Control.

The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See the link below for additional information about TBOR, Taxpayer Bill of Rights.

The Taxpayer Bill of Rights (TBOR), was adopted by IRS in June 2014, outlines the ten fundamental rights of taxpayers. Pub 1 Your Rights as a Taxpayer, was updated to include the modified language from the Taxpayer Bill of Rights.

Under the Right to Quality Service, taxpayers have the right to expect a fair and just tax system which provides taxpayers with the opportunity to have their facts and circumstances considered when it might affect their underlying liabilities, ability to pay or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service (TAS) if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through normal channels.

Refer to Taxpayer Advocate when the contact meets the TAS criteria see IRM 13.1.7, Taxpayer Advocate (TAS) Case Criteria, or when Form 911, Request for Taxpayer Advocate Assistance (and application for Taxpayer Assistance Order), is attached and steps cannot be taken to resolve the taxpayer’s issue the same day. See IRM 13.1.7.4, Same Day Resolution by Operations. When making a TAS referral, use Form 911, and forward to TAS in accordance with your local procedures.

The cases that are determined to have discrepancies are loaded onto the FUTA Case Processing (FCP) located on the CATRS platform.

Download to the FCP system will be identified by FUTA Release Year. In October 2024 the download will be identified as FUTA Release 2022.

The FCP System is a computer application housed on the CATRS platform. It allows inventory, correspondence, reporting and document preparation for the FUTA program.

Whenever a System problem is identified during FUTA processing, the Campus who identified the problem will issue an IT GET IT ticket.

Before issuing a ticket, contact a Headquarters Analyst for approval.

To issue a “Get It Ticket”, the User will do the following

Whenever a “systemic” problem is identified, the Tax Examiner/Clerk will compile documentation (description of the problem and samples) and give the information to the Site Coordinator who will inform the Headquarters FUTA Analyst of the problem and forward the documentation.

All changes made during the processing year will be posted on SERP.

Both PAS (Program Analysis System) Analysts and FUTA unit personnel must be aware of all of the alerts that are applicable to the current FUTA Release Year.

All employees must check SERP daily for a list of the most current and previous updates and alerts.

Every employer (other than agricultural and household employers) who, during the current or preceding calendar year, paid wages of $1,500 or more in any calendar quarter, or had one or more employees for some part of a day in any 20 or more different weeks, must file Form 940. Publication 15 (Circular E) Employer's Tax Guide, and the Instructions for Form 940 are excellent sources of information about the requirements for filing this return. This information is also helpful for determining the credit allowable for state contributions, experience rate, and deposit requirements.

Agricultural employers are liable if:

Household employers must pay FUTA taxes ONLY if they pay cash wages to all household employees totaling $1,000 or more in any calendar quarter in the current or prior calendar year. Household employees are those who perform household work in a private home, local college club, or a local chapter of a college fraternity or sorority. Generally individuals, estates, and trusts that owe FUTA tax for domestic service in a private home, must file Schedule H with their Form 1040 or Form 1041. For more information, see IRM 4.19.5.4.8.1, Schedule H — Household Employment Tax, Publication 926, Household Employer’s Tax Guide, and IRM 4.23.10.10.5, Household Employment Taxes.

Form 940 is an annual return filed by employers to report Federal Unemployment Tax. This return covers the period January 1 through December 31 and is due to be filed on or before January 31 following the close of the calendar year. However, if timely deposits have been made in full payment of such tax, Form 940 may be filed on or before February 10. This is an employer tax and cannot be collected or deducted from employee wages.

The IRS also uses Schedule A (Form 940), Multi-State Employer and Credit Reduction Information. The employer must file Schedule A (Form 940) if the employer paid wages to employees in more than one state or if they paid wages in any state that is subject to credit reduction.

Individuals who are household employers are generally required to report unemployment taxes on Schedule H, to be filed with their individual income tax returns (Form 1040 due April 15), or U.S. Fiduciary Income Tax return (Form 1041 due April 15).

Cases should be resolved using the Schedule H adjustment procedures. See IRM 4.19.5.4.8.1, Schedule H — Household Employment Tax and Publication 926, Household Employer's Tax Guide for more information.

If the correspondence is from a Power of Attorney (POA) or other third party, adhere to the procedures in IRM 21.3.7, Taxpayer Contacts, Processing Third Party Authorizations onto the Centralized Authorization File.

Taxpayers may list multiple years or a series of inclusive periods on their Form 2848. For fiscal years, the Form 2848 should show the ending year and month, using the YYYY format. For annual returns , the form may show the applicable years using a specific YYYY format.

See Exhibit 4.19.5-2 for Tolerance Chart and more information.

Some cases in the FUTA download require review prior to letter issuance. Update the FUTA FCP System to reflect the current wage, tax (TC 150 plus TC 290/298 or minus TC 291.), and entity information as shown on IDRS

The Statute Awareness Program was created to minimize barred assessments and erroneous abatements. The download will contain cases which have two statute situations that must be addressed. Cases where the statute date expires within 120 days will be worked on a priority basis. Refer to IRM 25.6, Statute of Limitations. The two types of statutes addressed in the FUTA processing are:

Untimely claims for credit or refund will be formally disallowed (fully or partially). However, in some situations , a claim will be timely but a refund or credit of the overpayment will not be allowable due to when the credit was deemed available. In those situations, this credit will be moved to the Excess Collection Files (XSF) and cannot be used to offset liabilities for other periods.

IRS prepared returns IRC Section 6020(b) — Employers are not entitled to a credit for state information if the IRS prepared their unemployment tax returns under the provisions of IRC Section 6020(b). The following identify an IRC Section 6020(b) case on the Master File transcript.

4011-C ScreeningRefund Statute Expiration Date (RSED)— Check IDRS for the RSED date on TXMOD for the tax period in question.

Duplicate DLN/EIN: Research the Schedule H EIN/Social Security Number (SSN) Match. Research must be performed to consolidate the information on these records. A DUP tab has now been added to FCP and these cases will now be accessed using the “Master “ Case ID Number/EIN. The DUP tab will list all the “child “ dup cases that are associated with the “Master” case and will be researched and updated accordingly.. The true dups will close all of the child dups automatically and will change the status from open dup to just open for the master case. The master case will continue to be updated and closed through the normal process. The updates for the child cases that are not true dups should be worked and closed in the DUP tab. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡

Zero Certification Cases—Are records that were not certified by the states because there was no match on the EIN, state wages were not reported, or payments were not made to the state. The Manager/Coordinator will mail the zero certs to each state. When these certs are mailed back from the states the Manager/Coordinator will assign designated te’s to work them following these procedures:

California Unity of Enterprise and North Carolina Unity of Enterprise—The States of California and North Carolina has a unique situation when matching our FUTA Identification Tape with employer account records. They have a system of assigning ONE state number to all businesses owned by that individual. This is called "Unity of Enterprise" . The IRS assigns EINs to business entity types (sole proprietor, corporation, etc.) and not individuals. Each entity type has its own Federal Employer Identification Number (FEIN). Use the following procedures when processing Unity of Enterprise cases.

Audit Potential (AP) Cases— These are cases where the state wage base is the same as the federal wage base, and the state taxable wages are more than the federal taxable wages (≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡). These cases are identified by a check mark in the AP field shown on the Money screen of the FCP System.

Potential Adjustment Registers (PARs) — PARs require case review prior to letter issuance. These are cases/records that could not pass Enterprise Computing Center at Martinsburg (ECC-MTB) calculation programs due to the rate indicator provided by the state or a freeze code posted to the Master File. The service center FCP System cannot automatically determine the tax or credit due on these cases.

Bankruptcy (TC 520) /Defunct (TC 530) Cases- The following procedures are to be used during the screening process.

Exempt Wages reported cases: If line 10 on the Form 940 matches the amount of the proposed refund on FCP and it’s within the tolerance close the case under cc REIM.

The priority for working Compliance cases are:

Information for General Processing will be the same throughout the FUTA Certification Case Processing program. See below when working both replies and recons.

See Exhibit 4.19.5-2 for Tolerance Chart and more information.

Policy Statement P-21-3 is in place to improve the quality and timely handling of taxpayer correspondence. When working replies sent in by the taxpayer (in response to the IRS letters sent) remember that care must be taken to attempt to conform to Policy Statement P-21-3 guidelines. Policy Statement P-21-3 requires an interim letter (for example; Letter 5825-C to be issued if unable to close the taxpayer's response within 30 days.) See Policy Statement P-21-3 .

When work is being shipped and/or transferred from one campus to another, the losing campus will issue a Letter 86-C .

When an account has a TC 300/308 on the module of the tax year you're working, close the case with no assessment.

Faxed Signatures- A faxed consent to assess additional tax (ex: Letter 4010-C is acceptable if contact was made and the case history documents the date of contact.)

Barred Statute follow the procedures below:

Cross Reference EIN(s) provided by the taxpayer:

Follow the table below for required actions necessary to process taxpayer replies. See IRM 4.19.5.4.7.4, Special Adjustment to Blocking Series for the appropriate blocking series.

Follow the table below for required actions necessary to process taxpayer replies. See IRM 4.19.5.4.7.4, Special Adjustment to Blocking Series for the appropriate blocking series

Assistance for responses by the state agency are listed in the table below:

The FCP will automatically generate an open status code "DADJ" .

The No Replies are worked systemically using the IAT GII tool. The TEs will the work the cases with indicators that prevent the tool from making the adjustment.

When an account has a TC 300/308 on the module of the tax year your working, do not assess, input a 290 for .00 and close the case using CC NRPY.

The Clerical Function will perform research for a new/better address when correspondence is returned undeliverable. Below are the steps the Clerical team has already taken:

Research IDRS for a new/better address within 14 days from the received date. When ENMOD shows an SSN that is responsible for the entity, use CC INOLES for the SSN and re-send the notice to that address. If ENMOD shows a Mr. and Mrs. listed, address the notice to only the taxpayer that owns the SSN found on ENMOD for disclosure purposes.

Many of the processing procedures Reconsiderations for can be found in the reply section of this IRM. See the references below to find the proper procedures.

Reconsiderations occur when taxpayer correspondence is received after the initial case is closed on the FCP System. See Exhibit 4.19.5-2 for Tolerance Chart and more information.

FCP will now open reconsiderations into status "LTRP" when the date is entered through the clerical "Replies/Undeliverables Recd" screen. All status "LTRP" cases will be manually closed on FCP using CC "LTWR" when the reconsideration is worked. Any updates, letters, or changes to money amounts must be made to FCP prior to closing the case on FCP.

CATRS only keeps three years of active data. At the end of three years, CATRS archives all cases that had case activity performed on them (it does NOT store cases we didn’t select to work). The first year cases that were archived was the 2014 program year and it will store 10 years of data. Archived case information can be accessed using the Archive Query option on the Case Query Screen. The information that can be viewed on an archived case is listed below.

The taxpayer may send an amended return or state recertification to try to resolve the case. Review the information and make any necessary corrections on IDRS. See IRM 4.19.5.4.5, Screening , IRM 21.3.3.4.17.1, Preparing Outgoing Manually Generated Correspondence , IRM 21.3.3.3.4, Quality and Timely Responses - Exception statement, and IRM 21.3.3.4.1, Case Control and Inventory Management to determine if additional correspondence is required.

Refer to IRM 4.19.5.4.7, General Case Processing Procedures, for additional information relating to specific case type procedures.

Reconsideration indicates the employer is a multi-state filer . Follow procedures outlined in IRM 4.19.5.4.8.9, Multi-State Cases.

Taxpayer's Reconsiderations indicates the incorrect State was transcribed. Follow procedures as shown for processing Reply cases. See IRM 4.19.5.4.8.3, Incorrect State . Input a TC 291 for the original tax assessment with the appropriate Reference Codes to correct the state.

When Processing Statute cases, be sure to consider the following:

Accounts in Collection Status - Any Reconsiderations that is received on an account with an active Collection status code (22, 24 or 26) on IDRS must be coordinated with the responsible function(s) prior to the FUTA issue being worked. For example:

When an account has a TC 300/308 on the module of the tax year your working, abate any FUTA tax assessment and issue a 380-C closing letter explaining all actions taken.

Discovered Remittance is a response and/or correspondence with an original form of payment attached such as a personal check, money order, or cashier’s check. Also, a loose check(s) discovered in an envelope or attached to a blank sheet of paper.

If any of the items listed in (1) are discovered, both the Form 3244, Payment Posting Voucher, and Form 4287, Record of Discovered Remittance must be completed.

Two copies of Form 3244 must be completed for each discovered remittance and contain entries in the following fields:

Form 4287, Record of Discovered Remittance, must be completed to log all discovered remittances. The following fields must have entries:

If remittance is found while working in the office, take the following steps:

If the remittance is found while teleworking, immediately take the following steps:

IRS CHECKS - Returned IRS refund checks are handled differently than regular Discovered Remittance. If an IRS refund check is found, take it to the manager/Lead Tax Examiner to be forwarded to the Refund Inquiry Unit.

VOIDED CHECKS - If the response has a “VOIDED” personal check attached, remove the check from the response and attach it to the Installment Agreement (IA) request. Route the “VOIDED” check with the IA to Collections.

The Federal Unemployment Tax Act (FUTA) provides for cooperation between the federal and state governments in the establishment and administration of unemployment insurance programs. The purpose of the FUTA Certification program is to verify that the payment information reported on Form 940 or Schedule H agrees with the information reported to us by the various State unemployment agencies.

Employers are subject to a payroll tax levied by the federal and state governments. The taxpayer may be allowed a maximum credit of 5.4 percent against the FUTA tax of 6.0 percent, for payments made to the state. Employers whose payments are received by the state after the due date of the federal return are allowed 90 percent of the credit that would have been allowed had the payments been made on time. In addition, an employer's credit will be reduced if the employer paid wages that are subject to the unemployment tax laws of a credit reduction state.

The FUTA unit issues three types of correspondence.

When the taxpayer states that they received one of these letters, inform the taxpayer that they should immediately respond to the FUTA unit at the address on the letter via mail or fax. If this information is not available, determine the campus working the case and refer to the fax numbers found at the CAWR/FUTA web site: CAWR/ FUTA website.

A FUTA assessment can be identified by researching Command Code TXMOD for a TC 290 on any of the following modules:

Follow procedures below when working FUTA certification issues

If the taxpayer states they previously sent information in response to the correspondence from IRS. Do not prepare a referral (Form 4442 or Letter 4442-C) to the FUTA Unit. Determine when the taxpayer submitted the information and follow the steps below:

Advise the taxpayer, failure to respond to the FUTA Unit or provide the requested information within the time period indicated in the letter they received can result in additional tax and penalty assessment.

The taxpayer must respond immediately to the address shown on the notice/letter with a clear and complete explanation of the reason for the discrepancy and the appropriate correcting documents. You may provide the fax number of the FUTA unit if the taxpayer wants to fax his reply. Never provide the voice number of the FUTA unit to the taxpayer or transfer the call to the FUTA unit.

The letters issued to the taxpayer of Schedule H FUTA cases, may only contain the EIN associated with the SSN on the Schedule H. Verify the EIN and SSN belong to the same taxpayer.

Function Codes:

Program Codes: The Small Business Self Employed campuses will record their progress using the following FUTA program codes. The "X" in the Program Codes 170X0 through 175X0 will reflect the current Release year being worked (i.e., 17010 - 17410). Program code 175X0 can reflect the current and prior Release years (i.e., 17590 or 17580, 17570) depending on the Release year of the case.

Document 7368, Basic Guide for Processing Statute Cases, is available to all campuses and area offices. If you do not have one, please see your manager. This document is also available electronically.

Statute Searches: All Tax Examiners are responsible to expedite statute imminent cases. Each tax examiner must perform a statute search on their inventories (paper and electronic) beginning 90 days prior to the statute expiration date as stated below. In addition, all new receipts to their inventory must be reviewed for statute criteria.

Each search must be documented using Form 11122 which will be maintained by management. See the CAWR/FUTA Home page at CAWR/FUTA Web Page for Form 11122, Employee's Statute Certification, and additional statute guidelines and Document 7368, Basic Guide for Processing Statute Cases, for Statute Processing.

The FUTA program processing start up for CSC is scheduled for October and the PCD is the last day of September, each year unless otherwise directed by Small Business/Self Employed (SBSE) Headquarters.

This requirement will be considered met if 95 percent of the workable download volume of cases are closed by the August 31 PCD. The remaining 5 percent of the inventory must be completed by September 30. This includes working the No Reply listings on a weekly basis and making any necessary tax adjustments.

The table below provides the schedule for current and subsequent FUTA Certification program case processing.

Management will provide a copy of the CCA 4243 listing to the appropriate tax examiner by either printing or sending an electronic copy to them through secured E-mail for the TE to review.

Each TE is responsible to ensure the control assigned to them on IDRS is physically in their possession and can be retrieved at any time. In addition, the tax examiner who the case is controlled to, must ensure appropriate and timely actions are taken as necessary.

In order to complete this each week the TE must do the following

When doing quarterly certification, each Tax Examiner must complete a Physical Inventory Certification Form (see Exhibit 4.19.5-1) and submit it to their manager.