Form 940 Explained: When to File + Instructions

What is Form 940?

IRS Form 940 is a form used by employers to record and remit the Federal Unemployment Tax Act (FUTA) tax when they pay more than $1,500 of wages to employees during a calendar quarter. Those who had more than one employee for more than 20 total weeks in a calendar year must also file IRS Form 940.

The deadline to file IRS Form 940 is January 31st, but if you remitted your FUTA tax when it was due throughout the year, you can delay filing until February 10th.

FUTA tax payments are due quarterly on:

• April 30th
• July 31st
• October 31st
• January 31st

The revenue generated from the FUTA tax helps cover unemployment payments for workers who have lost their jobs. Unemployment taxes are collected at the federal level, from the IRS via FUTA, but some states collect their own unemployment taxes from employers operating within their jurisdiction as well.

When to File Form 940?

There are two circumstances where an employer would need to file Form 940:

• You paid $1,500 or more to employees during any calendar quarter throughout the year
• You had one or more employees for part of the day, or the entire day for 20 or more weeks in the year

Both part and full-time employees should be considered in the circumstances above. However, if your business is classified as a partnership, the IRS says you do not need to count your business partners as employees.

Form 940 Instructions

To complete the form, follow the Form 940 instructions listed below:

1. Fill in the first box accurately with your business’s information and employer identification number (EIN)
2. In the box on the top right, check the box that matches the type of return you’re filing
   1. Amended: If you’re making changes to correct a return that you’ve already filed
   2. Successor employer: An employer that acquires the property and one or more employees of the proceeding business.
   3. No payments to employees: If you did not make payments to employees during the tax year and are not liable for FUTA tax, check this box, sign the form at Part 7, and file Form 940 with the IRS.
   4. The business closed or stopped paying wages: Check this box if this is a final return because you went out of business or stopped paying wages and will no longer be liable for remitting FUTA tax.
3. Part 1
   1. If you were required to pay state unemployment taxes, fill in the abbreviation for the state on line 1a
   2. If you had to pay state unemployment taxes in more than one state, checkbox 1b and fill out and attach Schedule A Form 940
   3. If you paid wages in a state that is subject to credit reduction, check the box on line 2
4. Part 2
   1. On line 3, report the total payments you made to employees throughout the year
   2. On line 4, report any payments you made that are exempt from FUTA tax
   3. On line 5, enter the total of the payments over the FUTA wage base that you paid to each employee after subtracting FUTA exempt payments on line 4
   4. On line 6, add the amounts from lines 4 and 5 and enter the result here
   5. On line 7, subtract the amount from line 6 from line 3
   6. On line 8, multiply line 7 by 0.006 and enter the result
5. Part 3
   1. Line 9: If you didn’t pay state unemployment tax because the wages you paid were exempt, you still must pay FUTA at the 6% rate
      1. If line 9 applies to you, leave lines 10 and 11 blank
   2. Line 10: If you paid some state unemployment tax, complete the worksheet on the IRS website
   3. Line 11: If you paid FUTA taxes and state unemployment taxes in a state with credit reduction, enter the total amount from Schedule A here
6. Part 4
   1. Line 12: Add lines 8-11 and record the total amount here
   2. Line 13: Enter the amount of FUTA taxes you’ve already deposited
   3. Line 14: Find your balance due by subtracting line 13 from line 12
      1. If line 14 is more than $500 you must deposit your FUTA tax according to these deadlines
      2. If line 14 is less than $500, pay your tax by credit, debt, EFW, check, or money order with your return
      3. If line 14 is less than $1, you don’t have to pay it
7. Part 5 (Only fill out if Line 12 is more than $500)
   1. On line 16, report the amount of your FUTA tax liabilities by quarter
   2. On line 17, enter your total tax liability from line 12
8. Part 6
   1. If you want to allow an employee, tax preparer, or other person to discuss this return with the IRS, fill out the appropriate information here. If not, check the box for “No”
9. Part 7
   1. Check to make sure that you’ve filled out both forms, then sign and fill out the additional personal information

How to File Form 940

Once you’ve completed Form 940, you’ll need to file it online via IRS.gov/EmploymentEfile or submit the form by mail to the IRS office nearest you. Here’s where to mail Form 940:

What happens if I don’t file Form 940? Filing late, not filing, or making late payments will result in penalties at a predetermined rate. One can amend this form by filing another IRS Form 940.

Final notes

No matter which form you’re filing with the IRS, accuracy is of the utmost importance. Let our team help! With decades of combined experience, our tax professionals are well-versed in best filing practices and have a wealth of knowledge to share with you. Contact us for a free tax consultation today.