Form 940: Employer's Annual Federal Unemployment (FUTA) Tax Return

Form 940 is generally used by employers to report annual federal unemployment tax and related information for the applicable reporting period.

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Introduction

Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, is generally used by employers to report federal unemployment tax under the Federal Unemployment Tax Act.

Employers use information from their payroll and employment records to determine applicable FUTA tax. The form generally covers an annual reporting period and may include information about wages, payments, adjustments, and tax amounts.

What Is Form 940?

Form 940 is an annual federal tax return used by applicable employers to report FUTA tax. FUTA tax generally helps fund federal and state unemployment programs.

The amount of FUTA tax depends on applicable employee wages, payments that may be subject to FUTA tax, and other factors. Employers should use their payroll records and applicable tax rules when completing the form.

Who Uses Form 940?

Form 940 may be used by employers that are required to report and pay FUTA tax. This can include businesses, organizations, and other employers with employees.

Not every employer is required to file Form 940. Filing and payment requirements can depend on the employer’s payroll, wages, employment activity, and other applicable circumstances.

What Information Is Needed?

Information for Form 940 generally comes from payroll and employment records. This may include total payments to employees, payments that are excluded from FUTA wages, FUTA taxable wages, and applicable tax amounts.

Employers should also keep records of state unemployment taxes and other employment tax information when completing Form 940. Accurate payroll records can help support the amounts reported on the return.

How to Fill Out/Complete Form 940

Form 940 is generally completed using the employer’s payroll and employment records for the applicable year. The employer determines which wages and payments are subject to FUTA tax and calculates the applicable amounts.

The form may also require information about state unemployment tax payments and adjustments. Employers should review their payroll records and applicable state and federal information before completing the return.

Section 1

Enter the employer’s identifying information and other basic information requested on Form 940. This generally includes the employer’s name, address, identification number, and applicable filing information.

Review the employer information carefully before completing the remaining sections. Correct identifying information helps ensure that the return is properly associated with the employer.

Section 2

Determine the employer’s total payments to employees for the applicable reporting period. This generally starts with the employer’s payroll records.

Review total wages and other employee payments against payroll reports and accounting records. Not every payment to an employee is necessarily subject to FUTA tax.

Section 3

Identify payments that are not subject to FUTA tax when applicable. Certain types of payments may be excluded from FUTA wages under federal tax rules.

Review payroll records and applicable exclusions carefully. Properly identifying excluded payments helps determine the amount of wages subject to FUTA tax.

Section 4

Calculate the employer’s FUTA taxable wages and applicable federal unemployment tax. The calculation generally begins with total employee payments and applicable exclusions.

Review the calculation against payroll records and previously determined FUTA amounts. The employer should make sure the reported tax agrees with the applicable records for the year.

Section 5

Report applicable state unemployment information and other adjustments requested on Form 940. State unemployment tax payments may affect the federal FUTA calculation in certain circumstances.

Review state unemployment records before completing this portion of the return. The applicable treatment may depend on where employees performed services and other circumstances.

Section 6

Report the employer’s FUTA tax liability and applicable payments or credits. The information may be used to determine whether additional tax is due or whether the employer has made sufficient payments.

Review the amounts against payroll tax records and payment records. Any difference between tax liability and payments should be reviewed before submitting the return.

Final Review

Review Form 940 after completing all applicable sections. Check the employer information, employee payments, excluded payments, FUTA taxable wages, tax calculation, state information, payments, and final amount.

A final review can help identify calculation or reporting errors before the return is submitted. Employers should retain Form 940 and supporting payroll records with their employment tax records.

Common Mistakes

Common mistakes involving Form 940 may include reporting incorrect wage amounts, overlooking excluded payments, calculating FUTA tax incorrectly, or failing to account for applicable state unemployment tax information.

Another common mistake is confusing FUTA tax with federal income tax withholding or federal employment taxes reported on other forms. Employers should keep separate records for the different types of employment taxes and reporting requirements.

Related IRS Forms

Form 940 may be associated with other federal employment tax forms used to report employee wages, federal income tax withholding, Social Security and Medicare taxes, and federal unemployment tax.

Form 941 and other employment tax forms may apply depending on the employer’s filing responsibilities. The specific forms required can vary based on the employer, employees, payroll, and tax circumstances.

Where to File or Submit

Form 940 is generally filed by the employer with the federal tax authority using an applicable filing method. The filing process can depend on the employer’s circumstances and the reporting period.

Employers should retain a copy of the completed return along with payroll records, employment tax records, state unemployment records, and supporting documentation.

Current IRS Form & Instructions

Tax forms and instructions may change over time. Employers should use the version of Form 940 that applies to the applicable reporting period and tax year

The information on this page is intentionally general so it can remain useful across multiple tax years. Before preparing or filing Form 940, users should review the applicable version of the form and its instructions because FUTA rates, wage rules, filing requirements, payment requirements, and other employment tax procedures may change.

Important Information / Disclaimer

This page is provided for general informational and educational purposes and offers a basic overview of Form 940. It is not intended to provide individualized tax, legal, accounting, payroll, employment, or financial advice and should not be considered a substitute for professional guidance.

Federal tax laws, employment tax rules, FUTA requirements, wage rules, filing procedures, and payment requirements may change over time. Information that applies to one employer, employee, payroll situation, or tax year may not apply to another, so users should consider their individual circumstances and seek assistance from a qualified tax professional when appropriate.