What is Form 940?
Form 940 is used to report your annual Federal Unemployment Tax Act (FUTA) tax. Together with state unemployment tax systems, the FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs. Most employers pay both a federal and a state unemployment tax.
Only employers pay FUTA tax. Don't collect or deduct FUTA tax from your employees' wages
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.
Who Must File Form 940?
Except as noted below, if you answer “Yes” to either one of these questions, you must file Form 940.
Did you pay wages of $1,500 or more to employees in any calendar quarter during 2018 or 2019?
Did you have one or more employees for at least some part of a day in any 20 or more different weeks in 2018 or 20 or more different weeks in 2019? Count all full-time, part-time, and temporary employees. However, if your business is a partnership, don't count its partners.
If your business was sold or transferred during the year, each employer who answered “Yes” to at least one question above must file Form 940. However, don't include any wages paid by the predecessor employer on your Form 940 unless you’re a successor employer. For details, see Successor employer under Type of Return, later.
If you’re not liable for FUTA tax for 2019 because you made no payments to employees in 2019, checkbox c in the top right corner of the form. Then go to Part 7, sign the form, and file it with the IRS.
If you won’t be liable for filing Form 940 in the future because your business has closed or because you stopped paying wages, checkbox d in the top right corner of the form. For more information, see Final: Business closed or stopped paying wages under Type of Return, later.
How to Fill Out Form 940?
Form 940 has 2 pages. Make sure to write your Employer Identification Number (EIN) and the name of your business on both pages.
When filling out your form, if there is a line that has a value of zero, leave it blank.
The form has 9 sections: your business information, the type of return, information about your return, your FUTA tax before adjustments, adjustments to your FUTA tax, your FUTA tax and balance due or overpayment, your FUTA tax liability, request regarding a third-party designee, and signature.
Employer Identification Number (EIN)
Provide your EIN.
Provide the full legal name of your business as written when you applied for your EIN.
Provide the trade name of your business if has any.
Provide the full address of your business.
Type of Return
Check all the boxes that apply for your business.
Check this box if this is an amended return that you are filing to correct a return that you previously filed.
b. Successor employer
Check this box if you are a successor employer and:
- You’re reporting wages paid before you acquired the business by a predecessor who was required to file a Form 940, or
- You’re claiming a special credit for state unemployment tax paid before you acquired the business by a predecessor who wasn't required to file a Form 940.
A successor employer is an employer who:
- Acquires substantially all the property used in a trade or business of another person (predecessor); and
- Immediately after the acquisition, employs one or more people who were employed by the predecessor.
c. No payments to employees in 2019
Check this box if you are not liable for FUTA tax for 2019 because you made no payments to employees in 2019.
d. Final: Business closed or stopped paying wages
Check this box if this is your final return because you went out of business or stopped paying wages and you won't be liable for filing Form 940 in the future.
Line 1a: If You had to Pay State Unemployment Tax in One State Only, Enter the State Abbreviation.
Provide the two-letter US Postal Service abbreviation for the state where you were required to pay your state unemployment tax.
Line 1b: If You had to Pay State Unemployment Tax in More than One State.
You are a multi-state employer.
Check the box and fill out Schedule A (Form 940) and attach it to your Form 940.
Line 2: If You Paid Wages in a State That is Subject to CREDIT REDUCTION.
For the tax year 2019, the United States Virgin Islands (USVI) is the only credit reduction state. If you paid wages subject to the unemployment tax laws of the USVI, check the box on line 2 and fill out Schedule A (Form 940).
Line 3: Total Payments to All Employees
Report the total payments you made during the calendar year on line 3. Include payments for the services of all employees, even if the payments aren't taxable for FUTA. Include compensation, fringe benefits, retirement or pension, and other payments
Line 4: Payments Exempt From FUTA Tax
If you provide an amount on line 4, check the appropriate box or boxes on lines 4a through 4e to show the types of payments exempt from FUTA tax. You only report a payment as exempt from FUTA tax on line 4 if you included the payment on line 3.
Line 4a: Fringe Benefits
Line 4b: Group-term Life Insurance
Line 4c: Retirement/Pension
Line 4d: Dependent Care
Line 4e: Other
Line 5: Total of Payments Made to Each Employee in Excess of $7,000
Only the first $7,000 you paid to each employee in a calendar year, after subtracting any payments exempt from FUTA tax, is subject to FUTA tax. This $7,000 is called the FUTA wage base.
On line 5, provide the total of the payments over the FUTA wage base you paid to each employee during 2019 after subtracting any payments exempt from FUTA tax shown on line 4.
Line 6 Subtotal (line 4 + line 5 = line 6)
Add the amounts on lines 4 and 5 and provide the result on line 6.
Line 7: Total taxable FUTA wages (line 3 – line 6 = line 7)
Subtract line 6 from line 3 and provide the result on line 7.
Line 8: FUTA tax before adjustments (line 7 x 0.006 = line 8)
Multiply line 7 by 0.006 and then provide the result on line 8.
Line 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).
If line 9 applies to you, lines 10 and 11 don't apply to you. Therefore, leave lines 10 and 11 blank. Don't fill out the worksheet in these instructions. Complete Schedule A (Form 940) only if you’re a multi-state employer.
Line 10: If SOME of the Taxable FUTA Wages You Paid Were Excluded From State Unemployment Tax, OR You Paid ANY State Unemployment Tax Late...
Complete the worksheet on page 11 of the instructions.
Enter the amount from line 7 of the worksheet
Line 11: If Credit Reduction Applies…
Enter the total from Schedule A (Form 940).
If any line in Part 4 does not apply, leave it blank.
Line 12: Total FUTA Tax After Adjustments (lines 8 + 9 + 10 + 11 = line 12)
Add the amounts shown on lines 8, 9, 10, and 11, and enter the result on line 12.
Line 13: FUTA Tax Deposited for the Year
Enter the amount of FUTA tax that you deposited for the year, including any overpayment that you applied from a prior year.
Line 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.
- If line 14 is less than $1, you don't have to pay for it.
Line 15: Overpayment.
If line 13 is more than line 12, enter the excess on line 15 and check either:
Apply the refund to your next return, or
Send you a refund.
Fill out Part 5 only if line 12 is more than $500. If line 12 is $500 or less, leave Part 5 blank and go to Part 6.
Line 16: Report 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.
1st quarter (January 1 – March 31)
Provide your FUTA tax liability for the 1st quarter.
2nd quarter (April 1 – June 30)
Provide your FUTA tax liability for the 2nd quarter.
3rd quarter (July 1 – September 30)
Provide your FUTA tax liability for the 3rd quarter.
4th quarter (October 1 – December 31)
Provide your FUTA tax liability for the 4th quarter.
Line 17: Total Tax Liability for the Year (lines 16a + 16b + 16c + 16d = line 17)
Your total tax liability for the year must equa