11. Federal Unemployment (FUTA) Tax - U.S. Virgin Islands
Employers Only
The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for
payments of unemployment compensation to workers who have lost their jobs. Most employers
pay both a Federal and a state unemployment tax. Only the employer pays FUTA tax; it is
not withheld from the employees' wages. For information, see the Instructions for Form
940.
You must file Form 940 or Form 940-EZ, Employer's Annual Federal
Unemployment (FUTA) Tax Return, if you are subject to FUTA tax under the following rules.
In general. You are subject to FUTA tax in 2003 on the wages you pay
employees who are not farmworkers or household workers if:
- You paid wages of $1,500 or more in any calendar quarter of 2002 or 2003 or
- You had one or more employees for at least some part of a day in any 20 different weeks
in 2002 or 20 or more different weeks in 2003.
Household workers. You are subject to FUTA tax only if you paid
total cash wages of $1,000 or more for all household workers in 2003 in any calendar
quarter in 2002 or 2003.
Farmworkers. You are subject to FUTA tax on the wages you pay to
farmworkers in 2003 if:
- You paid total cash wages of $20,000 or more for the farmwork in any calendar quarter to
farmworkers during 2002 or 2003 or
- You employed 10 or more farmworkers during at least some part of a day (whether or not
at the same time) during any 20 or more different weeks in 2002 or 20 or more different
weeks in 2003.
To determine whether you meet either test above, you must count wages paid to aliens
admitted on a temporary basis to the United States to perform farmwork, also known as
H-2(A) visa workers. However, wages paid to H-2(A) visa workers are not subject to the
FUTA tax.
In most cases, farmworkers supplied by a crew leader are considered employees of
the farm operator for FUTA tax purposes. However, this is not the case if either of the
following applies and the crew leader is not an employee of the farm operator:
- The crew leader is registered under the Migrant and Seasonal Agricultural Worker
Protection Act.
- Substantially all the workers supplied by the crew leader operate or maintain tractors,
harvesting or cropdusting machines, or other machines provided by the crew leader.
If (1) or (2) applies, the farmworkers are employees of the crew leader.
Rate. The FUTA tax rate for 2002 and 2003 is 6.2% of the first
$7,000 of wages you pay each employee during the calendar year. Only the employer pays the
tax. Do not deduct it from employees' wages. Generally, you may take a credit of 5.4%
against the FUTA tax for payments to U.S. Virgin Islands unemployment funds. Therefore,
your actual tax rate is usually 0.8% (6.2% - 5.4%). However, your credit is reduced if you
did not pay all required U.S. Virgin Islands unemployment tax by the due date of Form 940
or 940-EZ. The credit cannot be more than 5.4% of taxable FUTA wages.
Form 940 or 940-EZ. By January 31, file Form 940 or 940-EZ. If you
make deposits on time in full payment of the tax due for the year, you have 10 additional
days to file.
Form 940-EZ is a simple FUTA tax return for filers with uncomplicated tax situations.
You can generally use Form 940-EZ if:
- You are liable for unemployment tax only in the U.S. Virgin Islands;
- You make all required payments to the U.S. Virgin Islands by the due date of Form 940 or
940-EZ; and
- All wages subject to FUTA tax are also subject to U.S. Virgin Islands unemployment tax.
If you do not meet these conditions, file Form 940 instead. Once you have filed Form
940 or 940-EZ, the IRS will send you a preaddressed form.
Deposits. If you are not required to deposit using EFTPS (see
section 8), deposit the FUTA tax with an authorized financial institution. Send a deposit
coupon with each payment.
Figure your liability for FUTA tax deposits quarterly. Multiply by .008 (0.8%) the
amount of wages paid during the quarter to employees who have not exceeded $7,000 in wages
for the calendar year. Stop depositing FUTA tax on an employee's wages when his or her
wages exceed $7,000 for the calendar year. If any part of the first $7,000 paid to
employees is exempt from U.S. Virgin Islands unemployment taxes, you may deposit an amount
in excess of the .008 rate. If this amount (plus any undeposited amount from earlier
quarters) is more than $100, deposit it by the last day of the first month after the end
of the quarter. If the result is $100 or less, add it to the FUTA tax for the next
quarter, and do not make a deposit. Make this calculation for each of the first 3 quarters
of the year.
If the FUTA tax reportable on Form 940 or 940-EZ, minus the amounts deposited for the
first 3 quarters, is more than $100, deposit the tax by January 31. If the result is $100
or less, you may either deposit the tax or pay it with Form 940 or 940-EZ by January 31.
12. Special Rules for Various Types of Services and Payments
| The following
table summarizes the treatment of special classes of employment and special types of
payments. Employers who need more detailed information should consult their Internal
Revenue Service representative or see the Employment Tax Regulations. |
| Special
Classes of Employment and Special Types of Payments |
Treatment
Under Employment Taxes |
| Social Security and
Medicare |
Federal Unemployment
(U.S. Virgin Islands Only) |
| Agricultural labor: |
|
|
| 1. Service on farm in connection with cultivating
soil; raising or harvesting any agricultural or horticultural commodity; the care of
livestock, poultry, bees, fur-bearing animals, or wildlife. |
Taxable if $150 test or $2,500 test is met (see
section 6). |
Taxable if either test in section 11 is met. |
| 2. Service in employ of owner or operator of farm, if
major part of the services are performed on farm, in management or maintenance, etc., of
farm, tools, or equipment, or in salvaging timber, or clearing brush and other debris left
by hurricane. |
Taxable if $150 test or $2,500 test is met (see
section 6). |
Taxable if either test in section 11 is met. |
| 3. In connection with the production and harvesting
of turpentine and other oleoresinous products. |
Taxable if $150 test or $2,500 test is met (see
section 6). |
Taxable if either test in section 11 is met. |
| 4. Cotton ginning. |
Taxable if $150 test or $2,500 test is met (see
section 6). |
Taxable if either test in section 11 is met. |
| 5. In connection with hatching of poultry. |
Taxable (not farmwork if performed off farm).* |
Taxable if either test in section 11 is met. |
| 6. In operation or maintenance of ditches, canals,
reservoirs, or waterways used only for supplying or storing water for farming purposes and
not owned or operated for profit. |
Taxable if $150 test or $2,500 test is met (see
section 6). |
Taxable if either test in section 11 is met. |
| 7. In processing, packaging, delivering, etc., any
agricultural or horticultural commodity in its unmanufactured state: |
|
|
| a. In employ of farm operator. |
If operator produced over half of commodity
processed, taxable if $150 test or $2,500 test is met (see section 6); otherwise, taxable
(not farmwork). |
If employer produced over half of commodity
processed, taxable if either test in section 11 is met; otherwise taxable (not farmwork). |
| b. In employ of unincorporated group of
farm operators (never more than 20). |
If group produced all commodity processed, taxable if
$150 test or $2,500 test is met (see section 6); otherwise taxable (not farmwork).* |
If employer produced over half of commodity
processed, taxable if either test in section 11 is met; otherwise taxable (not farmwork). |
| c. In employ of other groups of farm
operators (including cooperative organizations and commercial
handlers). |
Taxable (not farmwork).* |
If employer produced over half of commodity
processed, taxable if either test in section 11 is met; otherwise taxable (not farmwork). |
| 8. Handling or processing commodities after delivery
to terminal market for commercial canning or freezing. |
Taxable (not farmwork).* |
Taxable (not farmwork). |
| 9. Household employees on farm operated for profit. |
Taxable if paid $1,400 or more in cash in 2003.
Exempt if performed by an individual who is under age 18 during any part of the calendar
year and housework is not the principal occupation of the employee. |
Taxable if either test in section 11 is met. |
| 10. Service not in the
course of employer's trade or business on farm operated for profit. (Cash payments only.) |
Taxable if $150 test or
$2,500 test is met (see section 6); unless performed by parent in employ of child. |
Taxable only if $50 or more
is paid in a quarter and employee works on 24 or more different days in that quarter or on
24 or more days in preceding quarter. |
| Aliens: |
|
|
| 1. Resident |
|
|
| a. Service performed in U.S.** |
Same as U.S. citizen; exempt if any part of service
as crew member of foreign vessel or aircraft is performed outside U.S. |
Same as U.S. citizen. |
| b. Service
performed outside U.S.** |
Taxable if (1) working for
an American employer or (2) an American employer by agreement covers U.S. citizens and
residents employed by its foreign affiliates. |
Exempt unless on or in
connection with an American vessel or aircraft and either performed under contract made in
U.S. or alien is employed on such vessel or aircraft when it touches U.S. port. |
| * Wages for services not considered
farmwork are reported on Form 941-SS. Other exemptions may apply. See sections 4 and 9. |
| ** U.S. includes U.S. Virgin Islands,
Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. |
| Special
Classes of Employment and Special Types of Payments |
Treatment
Under Employment Taxes |
| Social Security and
Medicare |
Federal Unemployment
(U.S. Virgin Islands Only) |
| Aliens (continued): |
|
|
| 2. Nonresidents working in U.S.* |
|
|
| a. Workers lawfully admitted under
section 101(a)(15)(H)(ii)(a) of the Immigration and Nationality
Act on a temporary basis to perform agricultural labor (H-2(A)workers). |
Exempt. |
Exempt. |
| b. Student, scholar, trainee, teacher,
etc., as nonimmigrant alien under section 101(a)(15)(F),(J), (M),
or (Q) or Philippine resident admitted to Guam under section
101(a)(15)(H) of the Immigration and Nationality Act. |
Exempt if service is performed for
purposes specified in section 101(a)(15)(F), (H), (J), (M), or (Q) of Immigration and
Nationality Act. However, these taxes may apply if the employee becomes a resident alien. |
| c. All other nonresidents working in
U.S.* |
Same as U.S. citizen; exempt if any part of service
as crew member of foreign vessel or aircraft is performed outside U.S. and employer is not
American employer. |
Same as U.S. citizen. |
| 3. Nonresident working on
American vessel or aircraft outside U.S.* |
Taxable if
under contract made in U.S. or worker is employed on vessel or aircraft when it touches
U.S. port. |
| Deceased worker's wages: |
|
|
| 1. Paid to beneficiary or estate in calendar year of
worker's death. |
Taxable. |
Taxable. |
| 2. Paid to beneficiary or
estate after the year of worker's death. |
Exempt. |
Exempt. |
| Dependent care
assistance programs (limited to $5,000; $2,500 if married filing separately). |
Exempt to the
extent it is reasonable to believe that amounts will be excludable from gross income under
Internal Revenue Code (IRC) section 129. |
| Disabled worker's wages
paid after the year in which worker became entitled to disability insurance benefits under
the Social Security Act. |
Exempt if worker did not
perform any service for employer during period for which payment is made. |
Taxable. |
| Domestic service in
college clubs, fraternities, and sororities. |
Exempt if paid to regular
student; also exempt if employee is paid less than $100 in a year by an income-tax-exempt
employer. |
Taxable if employer paid
total cash wages of $1,000 or more (for all household employees) in any calendar quarter
in the current or preceding year. |
| Employee achievement
awards. |
Exempt to the
extent it is reasonable to believe the amounts will be excludable from gross income under
IRC section 74(c). |
| Family employees: |
|
|
| 1. Child employed by parent (or by partnership in
which each partner is a parent of the child). |
Exempt until age 18. |
Exempt until age 21. |
| 2. Child employed by parent for domestic work or not
in the course of a trade or business. |
Exempt until age 21. |
Exempt until age 21. |
| 3. Parent employed by child. |
Taxable if in course of the child's business. For
household work in private home of child, see Pub. 926. |
Exempt. |
| 4. Spouse employed by
spouse. |
Taxable if in course of
spouse's business. |
Exempt. |
| Federal Employees: |
|
|
| 1. Members of uniformed services; Young Adult
Conservation Corps, Job Corps, or National Volunteer Antipoverty Program; Peace corps
volunteers. |
Taxable |
Exempt. |
| 2. All others. |
Taxable if employee is
covered by FERS or has a break in service of more than 1 year (unless the break in service
was for temporary military or reserve duty). Others generally subject to Medicare tax. |
Exempt unless worker is a
seaman performing services on or in connection with American vessel owned by or chartered
to the United States and operated by general agent of Secretary of Commerce. |
| * U.S. includes U.S. Virgin Islands,
Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. |
| Special
Classes of Employment and Special Types of Payments |
Treatment
Under Employment Taxes |
| Social Security and
Medicare |
Federal Unemployment
(U.S. Virgin Islands Only) |
| Fishing and related activities, employment in
connection with catching, harvesting, farming, etc.: |
|
|
| 1. Salmon or halibut. |
Taxable unless 3 applies. |
Taxable unless 3 applies.. |
| 2. Other fish and other aquatic forms of animal and
vegetable life. |
Taxable unless 3 applies. |
Exempt unless on vessel of more than 10 net tons (and
3 does not apply). |
| 3. An arrangement with the
owner or operator of the boat by which the individual receives a share of the boat's catch
(or proceeds from the sale of the catch), the share depending on the boat's catch, and
operating crew of the boat is normally fewer than 10 individuals.* |
Exempt if any
cash remuneration is: (a) $100 or less, (b) contingent on minimum catch, and (c) paid
solely for additional duties (such as mate, engineer, or cook for which cash
remuneration is traditional). |
| Foreign governments and
international organizations. |
Exempt. |
Exempt. |
| Foreign service by U.S. citizens: |
|
|
| 1. As U.S. Government employee. |
Same as within U.S. |
Exempt. (See also Federal employees on page
16). |
| 2. For foreign affiliates
of American employers and other private employers. |
Exempt unless (1) an
American employer by agreement covers U.S. citizens employed by its foreign affiliates or
(2) U.S. citizen works for American employer. |
Exempt unless (1) on
American vessel or aircraft and work is performed under contract made in U.S. or worker is
employed on vessel when it touches U.S. port, or (2) U.S. citizen works for American
employer (except in a contiguous country with which the U.S. has an agreement for
unemployment compensation) or in the U.S. Virgin Islands. |
| Fringe benefits. |
Taxable on
excess of fair market value of the benefit over the sum of an amount paid for it by the
employee and any amount excludable by law. However, optional special valuation rules may
apply.** |
| Government employees (other
than Federal). |
Taxable if services are
covered by section 218 (Social Security Act) agreement; taxable in certain other cases. |
Exempt. |
| Group-term life
insurance costs. (See Pub. 15-B for details.) |
Exempt, except for the cost
of premiums that provide more than $50,000 coverage. |
Exempt. |
| Homeworkers (industrial, cottage-industry); |
|
|
| 1. Common law employees. |
Taxable. |
Taxable. |
| 2. Statutory employees (see
section 1). |
Taxable if paid $100 or
more in cash in a year. |
Exempt. |
| Hospital interns. |
Taxable. |
Exempt. |
| Household workers (domestic
service in private homes; farmers, see Agricultural labor on page 15). (Also see Domestic
service in college clubs, fraternities, and sororities on page 16.) |
Taxable if paid $1,400 or
more in cash in 2003. Exempt if performed by a individual who is under age 18 during any
part of the calendar year and the work is not the principal occupation of the employee. |
Taxable if employee paid
total cash wages of $1,000 or more (for all household employees) in any calendar quarter
in the current or preceding year. |
| Insurance agents or solicitors: |
|
|
| 1. Full-time life insurance salesperson. |
Generally taxable regardless of common law. |
Taxable if
employee under common law and not paid solely by commissions (applies to both 1 and 2). |
| 2. Other salesperson of
life, casualty, etc., insurance. |
Taxable only if employee
under common law. |
| Interest foregone on
below-market loans related to compensation and deemed original issue discount. See IRC
section 7872 and its regulations for details. |
See Pub. 15-A. |
| Meals and
lodging furnished free or at a discounted price to the employee. (For household
employees, agricultural labor, and service not in the course of the employer's trade or
business, see Noncash payments on page 18.) |
(a) Meals - Taxable unless furnished for
employer's convenience and on the employer's premises. For information on the de minimis
fringe exclusion, see IRC section 132(e). |
| (b) Lodging -
Taxable unless furnished on employer's premises, for the employer's convenience, and as
condition of employment. |
| Ministers of churches
performing duties as such. |
Exempt. |
Exempt. |
| * Income derived by Native Americans
exercising fishing rights is generally exempt from employment taxes. |
| * * Benefits provided under cafeteria
plans may qualify for exclusion from wages for social security, Medicare, and FUTA taxes. |
| Special
Classes of Employment and Special Types of Payments |
Treatment
Under Employment Taxes |
| Social Security and
Medicare |
Federal Unemployment
(U.S. Virgin Islands Only) |
| Moving expense reimbursement: |
|
| 1. Qualified expenses. |
Exempt unless you have knowledge that the
employee deducted the expenses in a prior year. |
| 2. Nonqualified expenses. |
Taxable. |
Taxable. |
| Newspaper carrier under
age 18 delivering directly to readers. |
Exempt. |
Exempt. |
| Newspaper and magazine
vendors buying at fixed prices and retaining excess from sales to customers. |
Exempt. |
Exempt. |
| Noncash payments: |
|
|
| 1. For household work, agricultural labor, and
service not in the course of the employer's trade or business. |
Exempt. |
Exempt. |
| 2. To certain retail
commission salespersons ordinarily paid solely on a cash commission basis. |
Taxable. |
Taxable. |
| Nonprofit organizations: |
|
|
| 1. Religious, educational, charitable, etc.,
organizations described in IRC section 501(c)(3) exempt from income tax under IRC 501(a). |
Taxable if paid $100 or more in a year. (See Form
8274, Certification by Churches and Qualified Church-Controlled Organizations Electing
Exemption From Employer Social Security and Medicare Taxes, for election out of social
security and Medicare coverage for certain churches and church-contolled organizations.) |
Exempt. |
| 2. Corporations organized under Act of Congress
described in IRC section 501(c). |
Taxable if employee is paid $100 or more in a year
unless services excepted by IRC section 3121(b)(5) or (6). |
Taxable if employee is paid $50 or more in a quarter
unless services excepted by IRC section 3306(c)(6). |
| 3. Other organizations
exempt under IRC section 501(a) (other than a pension, profit-sharing, or stock bonus plan
described in IRC section 401(a)) or under IRC section 521. |
Taxable if employee is paid
$100 or more in a year. |
Taxable if employee is paid
$50 or more in a quarter. |
| Partners: Bona fide
members of a partnership. |
Exempt. |
Exempt. |
| Patients employed by
hospitals. |
Taxable (exempt for state
or local government hospitals). |
Exempt. |
| Religious orders: Members who are
instructed by the order to perform services: |
|
|
| 1. For the order, agency of the supervising church,
or associated institution. |
Exempt unless member has taken a vow of poverty and
the religious order or its autonomous subdivision irrevocably elects coverage for entire
active membership. |
Exempt. |
| 2. For any organization
other than those described in 1 above. |
Taxable. |
Taxable. |
| Retirement and pension plans: |
|
|
| 1. Employer contributions to a qualified plan. |
Exempt. |
Exempt. |
| 2. Elective contributions and deferrals to a plan
containing a qualified cash or deferred compensation arrangement (e.g., 401(k)). |
Taxable. |
Taxable. |
| 3. Employer contributions to certain nonqualified
deferred compensation plans. |
Taxable.* |
Taxable.* |
| 4. Employer contributions to individual retirement
accounts under a SIMPLE retirement plan. |
Exempt except for amounts contributed
under a salary reduction SIMPLE agreement. |
| 5. Employer contributions to IRC section 403(b)
annuity contracts. |
Taxable if paid through a salary
reduction agreement (written or otherwise) |
| 6. Distributions from
qualified retirement and pension plans. |
Exempt. |
Exempt. |
| * Taxable
when services are performed or when there is no substantial risk of forfeiture of the
rights to these amounts, whichever is later. |
| Special
Classes of Employment and Special Types of Payments |
Treatment
Under Employment Taxes |
| Social Security and
Medicare |
Federal Unemployment
(U.S. Virgin Islands Only) |
| Salespersons: |
|
|
| 1. Common law employees. |
Taxable. |
Taxable. |
| 2. Statutory employees (referred to in section 1). |
Taxable. |
Taxable. |
| 3. Statutory Nonemployees
(qualified real estate agents and direct sellers). |
Exempt. Treated
as if self-employed individuals if substantially all payments directly related to sales or
other output and services performed as nonemployees specified in written contract. Direct
sellers must be in the business of selling consumer products other than in a permanent
retail place of business. |
| Scholarships and
fellowship grants (includible in income under section 117(c)). |
Taxability
depends on the nature of the employment and the status of the organization. See Students
below. |
| Severance pay: |
Taxable. |
Taxable. |
| Service not in the
course of the employer's trade or business, other than on a farm operated for profit or
for household employment in private homes. |
Taxable if employee is paid
$100 or more in cash in a year. |
Taxable only if employee is
paid $50 or more in cash in a quarter and works on 24 or more different days in that
quarter or in the preceding quarter. |
| Sickness or injury payments under: |
|
|
| 1. Worker's compensation law. |
Exempt. |
Exempt. |
| 2. Certain employer plans. |
Exempt
after end of 6 calendar months after calendar month employee last worked for employer
(applies to both 2 and 3). See Pub. 15-A for details. |
| 3. No employer plan. |
|
| Students: |
|
|
| 1. Student enrolled and regularly attending classes
(generally, at least half time or equivalent) while pursuing course of study, performing
services for: |
|
|
| a. Private school, college, or
university. |
Exempt. |
Exempt. |
| b. Auxiliary nonprofit organization
operated for and controlled by school, college, or university. |
Exempt unless services are covered by a section 218
(Social Security Act) agreement. |
Exempt. |
| c. Public school, college, or university. |
Exempt unless services are covered by a section 218
(Social Security Act) agreement. |
Exempt. |
| 2. Full-time student performing service for academic
credit, combining academic instruction with work experience as an integral part of the
program. |
Taxable. |
Exempt unless program was established for or on
behalf of an employer or group of employers. |
| 3. Student nurse performing part-time services for
nominal earnings at hospital as incidental part of training. |
Exempt. |
Exempt. |
| 4. Student employed by
organized camps. |
Taxable. |
Exempt. |
| Supplemental
unemployment compensation benefits. |
Exempt under certain
conditions (see Pub. 15-A). |
Exempt under certain
conditions (see Pub. 15-A). |
| Tips: |
|
|
| 1. If $20 or more in a month. |
Taxable. |
Taxable for all tips reported in writing to employer. |
| 2 If less than $20 in a
month. |
Exempt. |
Exempt. |
| Worker's compensation. |
Exempt. |
Exempt. |
80chart6 |
