IRS Form 940 Unemployment Tax Report Explained

Form 940 - Who Must File, Due Date, Where to File

Form 940 Due Date and Unemployment Tax Due Dates
Due Dates for Form 940 and Unemployment Taxes. Alex Slobodkin/Getty images

Have you forgotten about unemployment taxes? If you have employees, you must report and pay unemployment taxes. You don't have to deduct these employment taxes from employee pay, but you must set aside amounts for this tax and report it on Form 940. 

What is IRS Form 940? 

IRS Form 940 is the federal unemployment tax annual report form. The form first calculates the employer's federal unemployment tax liability, then adjusts for any state unemployment taxes paid, then calculates the unemployment tax due.

Finally, the form compares unemployment tax due for the year to the tax already paid. The employer must pay the underpaid tax.

Who Must File Form 940?

An employer must file Form 940 if:

  • The employer paid wages of $1,500 or more to employees in a calendar quarter of the year
  • If the employer had one or more employees for at least some part of a day in any 20 or more different weeks in either of the past two years. Employers must count all full-time, part-time, and temporary employees, but not owners or partners. 

When is Form 940 Due? 

A quick answer, then more details:

Form 940: Employer's Annual Federal Unemployment Tax Return, is the annual reporting form for federal unemployment tax (FUTA Taxes)

The due date for Form 940 is January 31, for the previous year. However, the IRS says that if you deposited all of the FUTA tax when due, you have 10 additional calendar days to file. If January 31 is a weekend or holiday, the Form 940 due date is the next business day.

 

However, if you deposited all your FUTA tax when it was due, the IRS says you have an additional 10 days to file Form 940. 

In addition to the annual FUTA report on Form 940, employers must also make payments on unemployment taxes, either annually or quarterly, depending on the amount owed. 

Unemployment taxes are paid by employers to fund federal and state unemployment tax funds, which provide payments to employees who have been terminated or laid off from their employment.

Employment taxes payments are based on employee wages and salaries, up to a maximum of $7000 of wages per year per employee, at a rate of 0.8 percent.

Completing and Submitting Form 940

IRS Form 940 is used to compute the amount of federal unemployment tax liability of a business from the previous year. The form also is used to determine the amount of unemployment tax owed for the previous year, and any unpaid and due unemployment taxes. 

The process of completing Form 940 includes: 

  • Calculating the total amount of payroll for all employees for the year in question
  • Then subtracting payments not included in unemployment tax liability and
  • Subtracting employee payments in excess of $7000 for the year. 
  • Finally, the federal unemployment tax is calculated. 

Read more details about how federal unemployment tax liability is calculated on Form 940. 

Where to File Form 940 

Where you file Form 940 depends on the state where your business is located and whether or not you are filing this form with or without a payment. See the IRS IRS instructions for Form 940 for a list of states and addresses for filing Form 940. 

  

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