The IRS 940 form is a document that businesses use to report their annual Federal Unemployment Tax Act (FUTA) tax. This tax helps to fund state workforce agencies. Filing this form correctly is essential for employers to ensure they are in compliance with federal requirements.
Navigating the complexities of tax requirements is a critical task for any employer, and understanding the IRS 940 form is a cornerstone of this process. This document is essential for reporting annual Federal Unemployment Tax Act (FUTA) tax, a duty that primarily funds state workforce agencies. Employers are responsible for filling out this form to detail the amount of unemployment taxes owed or paid throughout the year. The importance of accurately completing and timely submitting this form cannot be overstated, as it ensures compliance with federal regulations while supporting the financial health of the nation's unemployment insurance system. Moreover, the IRS 940 form plays a pivotal role in maintaining eligibility for credit reductions and navigating the complexities of state unemployment funds. This form, while seemingly straightforward, requires a thorough understanding of its components and the precise calculation of owed taxes to avoid any potential penalties or interest for late or incorrect filings.
Form 940for 2020: Employer’s Annual Federal Unemployment (FUTA) Tax Return
850113
OMB No. 1545-0028
Department of the Treasury — Internal Revenue Service
Employer identification number
—
(EIN)
Name (not your trade name)
Trade name (if any)
Address
Number
Street
Suite or room number
City
State
ZIP code
Foreign country name
Foreign province/county
Foreign postal code
Type of Return
(Check all that apply.)
a. Amended
b. Successor employer
c. No payments to employees in 2020
d. Final: Business closed or stopped paying wages
Go to www.irs.gov/Form940 for instructions and the latest information.
Read the separate instructions before you complete this form. Please type or print within the boxes.
Part 1: Tell us about your return. If any line does NOT apply, leave it blank. See instructions before completing Part 1.
1a
If you had to pay state unemployment tax in one state only, enter the state abbreviation .
1b
If you had to pay state unemployment tax in more than one state, you are a multi-state
employer
2
If you paid wages in a state that is subject to CREDIT REDUCTION
Check here.
Complete Schedule A (Form 940).
Part 2: Determine your FUTA tax before adjustments. If any line does NOT apply, leave it blank.
3
Total payments to all employees
.
4
Payments exempt from FUTA tax
Check all that apply: 4a
Fringe benefits
4c
Retirement/Pension
4e
Other
4b
Group-term life insurance
4d
Dependent care
5
Total of payments made to each employee in excess of
$7,000
6
Subtotal (line 4 + line 5 = line 6)
7
Total taxable FUTA wages (line 3 – line 6 = line 7). See instructions
8
FUTA tax before adjustments (line 7 x 0.006 = line 8)
Part 3:
Determine your adjustments. If any line does NOT apply, leave it blank.
9
If ALL of the taxable FUTA wages you paid were excluded from state unemployment tax,
multiply line 7 by 0.054
(line 7 × 0.054 = line 9). Go to line 12
10
If SOME of the taxable FUTA wages you paid were excluded from state unemployment tax,
OR you paid ANY state unemployment tax late (after the due date for filing Form 940),
complete the worksheet in the instructions. Enter the amount from line 7 of the worksheet .
11
If credit reduction applies, enter the total from Schedule A (Form 940)
Part 4:
Determine your FUTA tax and balance due or overpayment. If any line does NOT apply, leave it blank.
12
Total FUTA tax after adjustments (lines 8 + 9 + 10 + 11 = line 12)
13
FUTA tax deposited for the year, including any overpayment applied from a prior year
14
Balance due. If line 12 is more than line 13, enter the excess on line 14.
• If line 14 is more than $500, you must deposit your tax.
•
If line 14 is $500 or less, you may pay with this return. See instructions
15
Overpayment. If line 13 is more than line 12, enter the excess on line 15 and check a box below
You MUST complete both pages of this form and SIGN it.
Check one:
Apply to next return.
Send a refund.
Next N
For Privacy Act and Paperwork Reduction Act Notice, see the back of the Payment Voucher.
Cat. No. 11234O
Form
940 (2020)
850212
Employer identification number (EIN)
Part 5: Report your FUTA tax liability by quarter only if line 12 is more than $500. If not, go to Part 6.
16Report the amount of your FUTA tax liability for each quarter; do NOT enter the amount you deposited. If you had no liability for a quarter, leave the line blank.
16a
1st quarter (January 1 – March 31) . .
. .
16b
2nd quarter (April 1 – June 30) . . .
16c
3rd quarter (July 1 – September 30) .
16d
4th quarter (October 1 – December 31)
17 Total tax liability for the year (lines 16a + 16b + 16c + 16d = line 17) 17
Total must equal line 12.
Part 6: May we speak with your third-party designee?
Do you want to allow an employee, a paid tax preparer, or another person to discuss this return with the IRS? See the instructions for details.
Yes. Designee’s name and phone number
Select a 5-digit personal identification number (PIN) to use when talking to the IRS.
No.
Part 7: Sign here. You MUST complete both pages of this form and SIGN it.
Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete, and that no part of any payment made to a state unemployment fund claimed as a credit was, or is to be, deducted from the payments made to employees. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
Sign your name here
Date
/ /
Print your name here
Print your title here
Best daytime phone
Paid Preparer Use Only
Preparer’s name
Preparer’s signature
Firm’s name (or yours if self-employed)
Check if you are self-employed
PTIN
/
EIN
Phone
Page 2
Form 940 (2020)
Form 940-V, Payment Voucher
Purpose of Form
Complete Form 940-V if you’re making a payment with Form 940. We will use the completed voucher to credit your payment more promptly and accurately, and to improve our service to you.
Making Payments With Form 940
To avoid a penalty, make your payment with your 2020 Form 940 only if your FUTA tax for the fourth quarter (plus any undeposited amounts from earlier quarters) is $500 or less. If your total FUTA tax after adjustments (Form 940, line 12) is more than $500, you must make deposits by electronic funds transfer. See When Must You Deposit Your FUTA Tax? in the Instructions for Form
940.Also see sections 11 and 14 of Pub. 15 for more information about deposits.
Use Form 940-V when making any payment with F! Form 940. However, if you pay an amount with CAUTION Form 940 that should’ve been deposited, you
may be subject to a penalty. See Deposit Penalties in section 11 of Pub. 15.
Specific Instructions
Box 1—Employer identification number (EIN). If you don’t have an EIN, you may apply for one online by visiting the IRS website at www.irs.gov/EIN. You may also apply for an EIN by faxing or mailing Form SS-4 to the IRS. If you haven’t received your EIN by the due date of Form 940, write “Applied For” and the date you applied in this entry space.
Box 2—Amount paid. Enter the amount paid with Form 940.
Box 3—Name and address. Enter your name and address as shown on Form 940.
•Enclose your check or money order made payable to “United States Treasury.” Be sure to enter your EIN, “Form 940,” and “2020” on your check or money order. Don’t send cash. Don’t staple Form 940-V or your payment to Form 940 (or to each other).
•Detach Form 940-V and send it with your payment and Form 940 to the address provided in the Instructions for Form 940.
Note: You must also complete the entity information above Part 1 on Form 940.
Detach Here and Mail With Your Payment and Form 940.
Form 940-V
Payment Voucher
Department of the Treasury
Don’t staple or attach this voucher to your payment.
2020
Internal Revenue Service
1 Enter your employer identification number (EIN).
Dollars
Cents
Enter the amount of your payment.
Make your check or money order payable to “United States Treasury”
3Enter your business name (individual name if sole proprietor).
Enter your address.
Enter your city, state, and ZIP code; or your city, foreign country name, foreign province/county, and foreign postal code.
Privacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. We need it to figure and collect the right amount of tax. Chapter 23, Federal Unemployment Tax Act, of Subtitle C, Employment Taxes, of the Internal Revenue Code imposes a tax on employers with respect to employees. This form is used to determine the amount of the tax that you owe. Section 6011 requires you to provide the requested information if you are liable for FUTA tax under section 3301. Section 6109 requires you to provide your identification number. If you fail to provide this information in a timely manner or provide a false or fraudulent form, you may be subject to penalties.
You’re not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books and records relating to a form or instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law.
Generally, tax returns and return information are confidential, as required by section 6103. However, section 6103 allows or requires the IRS to disclose or give the information shown on your tax return to others as described in the Code. For example, we may disclose
your tax information to the Department of Justice for civil and criminal litigation, and to cities, states, the District of Columbia, and U.S. commonwealths and possessions to administer their tax laws. We may also disclose this information to other countries under a tax treaty, to federal and state agencies to enforce federal nontax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism.
The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is:
Recordkeeping
9 hr., 19 min.
Learning about the law or the form . .
1 hr., 23 min.
Preparing, copying, assembling, and
sending the form to the IRS
1 hr., 36 min.
If you have comments concerning the accuracy of these time estimates or suggestions for making Form 940 simpler, we would be happy to hear from you. You can send us comments from www.irs.gov/FormComments. Or you can send your comments to Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW,
IR-6526, Washington, DC 20224. Don’t send Form 940 to this address. Instead, see Where Do You File? in the Instructions for Form 940.
Filing the IRS 940 form is an essential process for employers as it relates to reporting annual Federal Unemployment Tax Act (FUTA) tax. This process can seem daunting at first glance, but breaking it down into manageable steps can simplify the task. The form serves to calculate the amount of unemployment tax an employer owes. It's important to fill out this form accurately and submit it in a timely manner to ensure compliance with tax regulations. Let's go through the necessary steps to accurately complete the IRS 940 form.
Successfully completing and submitting the IRS 940 form is a critical step for employers in remaining compliant with federal tax obligations. By following these steps closely, employers can navigate this process with confidence, ensuring accurate reporting of unemployment taxes and avoiding potential penalties for late or incorrect filings.
What is an IRS 940 form?
The IRS 940 form, officially known as the Employer's Annual Federal Unemployment (FUTA) Tax Return, is a document businesses must file to report their annual federal unemployment tax liability. This tax funds the federal government's oversight of the state unemployment insurance programs. Employers are responsible for filing this form to report the amount of unemployment taxes due to the IRS.
Who needs to file the IRS 940 form?
Businesses that have paid wages of $1,500 or more in any calendar quarter, or had one or more employees for at least part of a day in any 20 or more different weeks in a year, are required to file the IRS 940 form. This includes corporations, partnerships, and sole proprietors in a wide range of industries.
When is the IRS 940 form due?
The filing deadline for the IRS 940 form is January 31st of the year following the reported year. If all FUTA tax was deposited when due, the deadline is extended to February 10th. It is crucial for employers to adhere to this deadline to avoid potential penalties for late filing.
How do I calculate the FUTA tax rate?
The FUTA tax rate is 6.0% of the first $7,000 paid in wages to each employee annually. However, employers who pay their state unemployment tax on time may be eligible for a credit of up to 5.4%, effectively reducing their FUTA tax rate to 0.6%. Specific conditions must be met to qualify for this credit.
Can I file the IRS 940 form electronically?
Yes, employers have the option to file the IRS 940 form electronically through the IRS e-file system. Many find this method more convenient and efficient than paper filing. Additionally, there are IRS-approved e-file providers who can submit the form on behalf of an employer.
What happens if I file the form late?
If an employer files the IRS 940 form after the due date or fails to pay the due taxes on time, they may face penalties and interest on the overdue amount. The IRS encourages prompt filing and payment to avoid these additional charges. Employers who anticipate difficulty in meeting the deadline should contact the IRS to discuss potential solutions.
Are there any exceptions to filing the IRS 940 form?
Certain types of employment are exempt from FUTA tax, and therefore, businesses employing such workers would not file the IRS 940 form. These exceptions include family employment, such as hiring a child or spouse, and services performed by independent contractors. It's important to review IRS guidelines to determine if your business qualifies for these exemptions.
What should I do if I made a mistake on my filed IRS 940 form?
If an employer discovers an error on a previously filed IRS 940 form, they should file an amended return as soon as possible to correct the mistake. The IRS provides instructions for amending a return, which include filling out the form again accurately and indicating that it's an amended return. Prompt action can help minimize any impact of the error.
Filling out the IRS 940 form, which is crucial for reporting annual Federal Unemployment Tax Act (FUTA) tax, can be a challenging task for many employers. Unfortunately, there are common mistakes that can lead to inaccuracies, potential audits, and penalties. Understanding what these errors are can help ensure the process is smoother and more accurate.
One major mistake is not checking the correct box in Part 1 concerning business type. This section is vital because it determines which sections of the form you must complete. For example, ticking the wrong box might mean missing out on important deductions or improperly calculating your tax owed. Always double-check this area to ensure accuracy.
Another common error is incorrectly calculating FUTA tax. The FUTA tax rate is applied to the first $7,000 of each employee's earnings, but issues often arise when employers mistakenly apply the rate to all wages or fail to account for state unemployment contributions that can lower the federal rate. It’s crucial to closely follow the calculations outlined in the form to avoid either underpaying or overpaying.
Employers also frequently misclassify employees, which leads to errors on the 940 form. This misclassification can be between independent contractors and employees or between exempt and non-exempt status. Since FUTA taxes only apply to employees, not contractors, getting this classification wrong can significantly impact the accuracy of your reported taxes.
Failure to report all state unemployment wages paid is another mistake that can occur on the 940 form. All wages subject to state unemployment tax must be reported, as this affects the calculation of the FUTA credit. Omitting wages or inaccurately reporting them can lead to incorrect FUTA tax calculations and potential issues with the IRS.
Last but not least, a significant error is missing the deadline for filing the 940 form. The IRS has strict deadlines, typically January 31st, following the end of the calendar year the report covers. Late submissions can result in penalties and interest, adding to the total tax liability. Employers must be proactive in preparing their 940 forms well ahead of the deadline to ensure all information is accurate and complete.
When businesses prepare their annual tax returns, the IRS Form 940 often plays a crucial role. However, it's just one piece of the puzzle. Several other forms and documents usually accompany it, each with its distinct purpose and requirement. Understanding these additional documents can simplify the process and ensure compliance with federal tax obligations.
Together with IRS Form 940, these documents form a complete set providing a comprehensive picture of a business's tax liabilities and payroll expenses. Properly preparing and filing them is essential for meeting legal obligations and maintaining a healthy business. Ensuring accuracy and completeness can also help avoid penalties and interest for underpayment or late filing. This suite of forms, while it might seem complex at first glance, helps businesses report their financial activities accurately and comply with federal and state tax laws.
The IRS Form 940 is akin to the IRS Form 941, Employer's Quarterly Federal Tax Return. Both are essential payroll tax forms used by employers, but they serve different purposes. While Form 940 is filed annually and focuses on reporting and paying the federal unemployment taxes (FUTA), Form 941 is submitted quarterly to report wages paid, tips earned by employees, and the withholding of federal income tax, as well as Social Security and Medicare taxes. This distinction in timing and tax type underscores the complementary roles these forms play in fulfilling an employer's federal tax obligations.
Another document closely related to IRS Form 940 is the IRS Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. Similar to Form 940, Form 943 is designed for a specific type of employer, in this case, those employing farm workers. While Form 940 deals with unemployment taxes for a broader range of industries, Form 943 caters specifically to reporting and paying federal income tax withheld from the wages of farmworkers, along with the employer and employee portions of Social Security and Medicare taxes. This specialization illustrates the IRS's approach to addressing the unique needs of different employment sectors.
IRS Form 944, Employer’s Annual Federal Tax Return, also shares similarities with IRS Form 940. Form 944 is designed for smaller employers whose annual liability for Social Security, Medicare, and withheld federal income taxes is $1,000 or less, allowing them to file annually instead of quarterly. Both Form 940 and Form 944 cater to the annual reporting requirement, albeit for different types of taxes—Form 940 for unemployment taxes and Form 944 for income, Social Security, and Medicare taxes. This reflects the IRS's efforts to streamline tax reporting for small businesses.
The IRS Form W-2, Wage and Tax Statement, while primarily a document provided by the employer to the employee and the Social Security Administration, also intersects with the information reported on Form 940. Employers use Form W-2 to report an employee’s annual wages and the amount of taxes withheld from their paycheck. The total wages reported on all W-2 forms by an employer can impact the calculation of the total unemployment tax liability on Form 940. This overlap ensures that wage reporting to employees and tax reporting to the federal government are aligned.
Similarly, IRS Form W-3, Transmittal of Wage and Tax Statements, complements Form 940 in the context of annual employment tax reporting. While Form W-3 is used to submit copies of all W-2 forms from an employer to the Social Security Administration, it functions as a summary document for employee wages and taxes withheld. This information indirectly supports the calculations and verifications of wage reporting and tax liabilities, including those related to unemployment taxes reported on Form 940. The interconnectedness of these forms aids in maintaining the integrity of employment tax reporting.
Lastly, the IRS Form 1099 series, particularly Form 1099-NEC, Nonemployee Compensation, relates to the broader framework of tax reporting within which Form 940 operates. While Form 1099-NEC is used to report payments to independent contractors, not employees, it highlights the differentiation in tax reporting obligations for different types of workers. Employers do not report 1099 contractors on Form 940 since they do not pay unemployment taxes for these workers. Nonetheless, the existence of both forms underlines the comprehensive nature of tax documentation required by the IRS to distinguish between employee and contractor relationships and their respective tax treatments.
Filling out the IRS 940 form, which is used to report annual Federal Unemployment Tax Act (FUTA) tax, requires attention to detail and an understanding of your obligations under the law. Here are several guidelines to ensure accuracy and compliance.
Things You Should Do:
Things You Shouldn't Do:
The IRS 940 form, also known as the Federal Unemployment Tax Act (FUTA) tax form, is surrounded by misunderstandings. These misconceptions can lead to businesses not complying with federal regulations, potentially resulting in penalties and fines. Understanding the truth behind these common myths is essential for all employers.
Cleaning up these misconceptions is crucial for employers to ensure compliance with federal tax regulations and avoid unnecessary penalties. When in doubt, consulting a tax professional or the IRS directly for guidance on specific situations can help clarify any confusion surrounding Form 940.
Understand the purpose of the IRS 940 form. It's used annually by employers to report federal unemployment taxes (FUTA) that they have paid. This tax funds state workforce agencies and must be filed by businesses that meet certain criteria, such as paying wages of $1,500 or more in any calendar quarter or having at least one employee for some part of the day in any 20 or more different weeks in a year.
Determine your business's eligibility. Before filling out Form 940, confirm that your business is indeed required to file it. This involves assessing whether you've met the wage payment threshold or the employee count criterion within the tax year.
Gather necessary information before filing. To accurately fill out Form 940, you need your Employer Identification Number (EIN), the total amount of annual wages paid to your employees, and any state unemployment taxes you've paid. Having this information at hand will simplify the filing process.
Understand how to calculate your FUTA tax liability. The form requires you to calculate your FUTA tax liability by applying the FUTA tax rate to the first $7,000 of wages paid to each employee throughout the year. Keep in mind, payments made beyond this cap are not subject to FUTA taxes. Also, credits are available for amounts paid into state unemployment funds, which can reduce your FUTA tax liability.
File the form on time to avoid penalties. The deadline for filing IRS Form 940 is January 31 following the end of the tax year. However, if you've deposited all FUTA tax when it was due, you can file the form by February 10. Late filings can result in penalties and interest charges.
Utilize electronic filing for convenience and efficiency. While you can file Form 940 by mail, the IRS encourages electronic filing because it's faster and tends to be more accurate. This method can also provide you with immediate confirmation once your form has been submitted.
1750 Form - Allows for quick verification and inventory control of packed items against listed details.
Wh-60 - It serves as both a receipt for the employee and a declaration by the employer to the Wage and Hour Division of compliance with labor laws.