Form 940: What It Is, When to File, and Filing Instructions

Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. The authorization will automatically expire 1 year after the due date for filing your Form 940 (regardless of extensions). If you or your designee wants to end the authorization before it expires, write to the IRS office for your location using the Without a payment address under Where Do You File, earlier.

For a definition of “responsible party,” see the Instructions for Form SS-4. Certification program for professional employer organizations (PEOs). For the latest information about developments related to Form 940 and its instructions, such as legislation enacted after they were published, go to IRS.gov/Form940.

Beware: Quarterly tax payments

This means that the effective FUTA tax rate is 0.12% (up 0.6% from the standard rate of 0.6%). The potential 2024 credit reductions for these states (plus Connecticut) is 0.9%. An item to note for 2023 (and important to keep in mind when completing Form 940) is that the states of California and New York currently all have overdue unemployment insurance loans. While Uncle Sam keeps an eye out for these overdue payments — and because the loans are past due — each has been assessed a FUTA credit reduction for 2023 and has lost part of the 5.4% tax credit. For 2024, the DOL lists California, Connecticut, and New York as potential credit reduction states. While your business only has to file Form 940 once a year, it probably needs to make quarterly FUTA tax payments.

What does this mean for employers in these states?

Learn how to fill out Form 940 the right way to avoid penalties and fines. We ask for the information on Form 940 to carry out the Internal Revenue laws of the United States. We need it to figure and collect the right amount of tax.

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A state with a credit reduction would receive a credit reduction rate of 0.3% for each year they don’t repay the federal loan in full. For example, a state that has not paid in full for one year would receive a tax credit of 5.1% instead of 5.4% (5.4% – 0.3%). To make sure that businesses comply with federal tax laws, the IRS monitors tax filings and payments by using a numerical system to identify taxpayers.

• This may be especially helpful to any small business that currently sends their 1099 forms on paper to the IRS.
• The FUTA tax applies to the first $7,000 you pay to each employee during a calendar year after subtracting any payments exempt from FUTA tax.
• That means Form 940 is your responsibility as an employer, ensuring that you’ve properly calculated and reported what you owe based on the wages you’ve paid throughout the year.
• Employers in the United States are required to pay into Federal Unemployment benefits for their employees.
• Currently, the FUTA tax rate is 6.0% and applies to the first $7,000 you paid to each employee as wages during the year.
• Postal Service on or before the due date, or sent by an IRS-designated private delivery service (PDS) on or before the due date.

How Do You Figure Your FUTA Tax Liability for Each Quarter?

For more information, see Disregarded entities and qualified subchapter S subsidiaries in the Introduction section of Pub. You must complete line 1a or 1b even if you weren’t required to pay any state unemployment tax because your state unemployment tax rate(s) was zero. You may leave lines 1a and 1b blank only if all of the wages you paid to all employees in all states were excluded from state unemployment tax. If you leave lines 1a and 1b blank, and line 7 is more than zero, you must complete line 9 because all of the taxable FUTA wages you paid were excluded from state unemployment tax. A state that hasn’t repaid money it borrowed from the federal government to pay unemployment benefits is called a credit reduction state.

• It’s about time to complete Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.
• However, Form 940 is filed annually and it only reports an employer’s FUTA taxes.
• Write to the IRS office where you filed your return (using the Without a payment address under Where Do You File, earlier) to notify the IRS of any name change.
• To pay your full FUTA tax balance or make quarterly deposits online, you’ll use the Electronic Federal Tax Payment System (or EFTPS).
• While most businesses with employees need to file Form 940 and pay FUTA taxes, not all employers are required to do so.
• To figure your total FUTA tax before adjustments, multiply line 7 by 0.006 and then enter the result on line 8.
• If Line 13 is more than Line 12, enter the difference on Line 15, which represents the overpayment.

Sole proprietors without employees typically do not need to submit Form 940. Nevertheless, if a sole proprietor employs individuals who fulfill the listed criteria, they may be required to submit form 940 instructions this form. The due date for filing Form 940 is January 31 of the year following the previous tax year. For example, the due date for filing IRS Form 940 for tax year 2023 was January 31, 2024. However, for taxpayers who deposited all of the outstanding FUTA tax on or before the due date, the deadline was February 12, 2024. However, the tribe must have participated in the state unemployment system for the full tax year and be in compliance with applicable state unemployment law.

Key Tips for Filing Form 940

If your tax for the next quarter is $500 or less, you’re not required to deposit your tax again until the cumulative amount is more than $500. Although Form 940 covers a calendar year, you may have to deposit your FUTA tax before you file your return. If your FUTA tax is more than $500 for the calendar year, you must deposit at least one quarterly payment. Your filing address may have changed from that used to file your employment tax return in prior years. For the IRS mailing address to use if you’re using a PDS, go to IRS.gov/PDSstreetAddresses. Select the mailing address listed on the webpage that is in the same state as the address to which you would mail returns filed without a payment, as shown in the table that follows.