Tax Law (Questions About Taxes)/LLC member and Futa calculation
Hi, I have a question about Form 940. Our LLC member draws a salary but is exempt from state unemployment. The rest of our employees are not exempt from state unemployment. So On Line10 Worksheet, Line 4 (credit for timely state unemployment tax payments + additional credit) is greater than Line 1 (max allowable credit), so that I got zero on line 10 of form 940 and only pay for the 0.8% of the taxable futa wages (includes officers $7000).
Does it make sense? The 5.4% of the member's $7000 got write off by the credit for the state UI tax we paid? This doesn't make sense, why am I not paying the 5.4% for the members?
For both the state (SUTA) and federal (FUTA) the income of the members of the LLC are excluded (not exempt) from being put on either reporting form. A member is not a paid employee but rather an investor able to receive a return on investment. At the end of the year the money a member draws out is off-set against their asset account for the year.
With this in mind the 940 and SUTA reporting form should match. Members of LLC's are not employees and can not draw unemployment benefits. The monies paid to a member DO NOT go on either form.