If you have employees, you may need to file IRS Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. This form helps the IRS track federal unemployment taxes that employers must pay. These taxes fund unemployment programs that provide temporary support to workers who lose their jobs. Think of it as a behind-the-scenes contribution that helps keep the unemployment safety net in place.
Who Needs to File Form 940?
You must file if you meet either of the following conditions:
- You paid $1,500 or more in wages during any calendar quarter of the year.
- You had one or more employees working for at least part of a day in 20 or more different weeks during the year.
Special rules may apply for household employers, agricultural employers, Indian Tribal Governments, and Tax-Exempt organizations, so check the IRS instructions if those apply to you.
When Is It Due?
Form 940 is filed once per year and the deadlines for this form are as follows:
- January 31, or,
- February 10 if you deposited all FUTA taxes on time
However, if the deadline falls on a weekend or holiday, then the due date is typically the next business day.
How FUTA Tax Works
FUTA tax applies only to a portion of each employee’s wages, up to an annual wage base set by the IRS. The tax is paid entirely by employers and is not withheld from employee paychecks.
Employers who also pay state unemployment taxes on time may qualify for a credit that reduces their FUTA tax liability. The IRS publishes the current tax rate and wage base each year in the official Form 940 instructions.
How to File
Filing Form 940 is usually straightforward. Here’s the general process for filing:
- Confirm eligibility – Make sure your business meets the filing requirements for FUTA tax.
- Calculate your FUTA tax liability – Use the wage base and tax rate provided in the current IRS instructions, adjusting for any credits you may qualify for.
- Make required deposits – Depending on how much FUTA tax you owe, you may need to make deposits during the year through the Electronic Federal Tax Payment System (EFTPS).
- Prepare Form 940 – You can file electronically (recommended for speed and accuracy) or submit a paper form.
- Submit by the deadline – January 31 (or February 10 if deposits were made on time).
The IRS strongly encourages electronic filing, but you may paper file Form 940. The mailing address depends on your state and whether you are including a payment with your form.
Common Questions
How is Form 940 different from Form 941?
Form 940 is for FUTA tax and filed annually. Form 941 reports income, Social Security, and Medicare taxes and is filed quarterly.
Do employees contribute to FUTA tax?
No. FUTA tax is an employer-only responsibility. Employees do not have FUTA withheld from their wages.
What if I make a mistake on Form 940?
You’ll need to file Form 940-X, Adjusted Employer’s Annual Federal Unemployment Tax Return, to correct it.
Conclusion
Form 940 might seem straightforward, but it’s easy to overlook deadlines, deposits, or credit calculations, especially if you manage multiple employees or pay across state lines. Many employers choose to use payroll providers or e-filing services to stay compliant and save time.
Always check the most recent IRS instructions for Form 940 before filing to ensure you’re meeting the current requirements.
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.
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