IRS Form 940 is an annual tax return filed by employers to report and pay Federal Unemployment Tax Act (FUTA) tax. These funds, together with state unemployment systems, provide payments for unemployed workers. Generally, don’t complete the Paid Preparer Use Only section if you’re filing the return as a reporting agent and have a valid Form 8655 on file with the IRS. However, if you have other employees in addition to household employees, you can choose to include the FUTA taxes for your household employees on Form 940 instead of filing Schedule H (Form 1040). If you file Form 940 electronically, you can e-file and use EFW to pay the balance due in a single step using tax preparation software or through a tax professional.
For further guidance, consult a tax professional or refer to the IRS guidelines. Some exceptions may apply based upon the employer’s situation. If you’re a household employer, form 940 instructions you must pay FUTA tax on wages that you paid to your household employees only if you paid cash wages of $1,000 or more in any calendar quarter within the past 2 years. It’s about time to complete Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. The FUTA tax return differs from other employment tax forms in a few ways.
If ALL of the Taxable FUTA Wages You Paid Were Excluded From State Unemployment Tax . . .
- With Taxfyle, your firm can access licensed CPAs and EAs who can prepare and review tax returns for your clients.
- However, the tribe must have participated in the state unemployment system for the full tax year and be in compliance with applicable state unemployment law.
- For example, the due date for filing IRS Form 940 for tax year 2023 was January 31, 2024.
- For the majority of small businesses, the form for the prior year is due on January 31 of each year.
- Form 940 is used to report the annual FUTA tax that employers are required to pay in order to support state unemployment agencies.
- If all of the taxable FUTA wages you paid were excluded from state unemployment tax, multiply line 7 by 0.054 and enter the result on line 9.
- That’s why we’re here to demystify all that goes into running payroll and taxes, and the forms that come along with them.
Your FUTA tax may be higher if you don’t pay the state unemployment tax timely by January 31, 2025 (or February 10, 2025, if that is your Form 940 due date). This is true regardless of whether state law defers the payment of taxes due until after this date. If you didn’t pay all state unemployment tax by the due date of Form 940, see the line 10 instructions. For wages paid to a work site employee, a CPEO is eligible for the credit whether the CPEO or a customer of the CPEO made the contribution with respect to a work site employee. The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 required the IRS to establish a voluntary certification program for PEOs.
- However, eligible employers can take a maximum credit of 5.4% for timely state unemployment tax payments, which makes the net tax rate 0.6%.
- This list of providers offers options based on the relevant tax year.
- And, print your name and title and provide a daytime phone number for the IRS to contact you.
- Don’t collect or deduct FUTA tax from your employees’ wages.
- The IRS provides a list of their approved software and a database of authorized e-file providers for you to choose from.
- To become a CPEO, the organization must apply through the IRS Online Registration System.
Information Returns
To figure your total FUTA tax before adjustments, multiply line 7 by 0.006 and then enter the result on line 8. To figure your subtotal, add the amounts on lines 4 and 5 and enter the result on line 6. See section 3306 and its related regulations for more information about FUTA taxation of retirement plan contributions, dependent care payments, and other payments. If you pay a tax preparer to fill out Form 940, make sure the preparer shows your business name exactly as it appeared when you applied for your EIN. Services rendered by employees of a state, or a political subdivision or instrumentality of the state, are exempt from FUTA tax and no Form 940 is required.
How to submit Form 940 and make your FUTA tax payments
Again, skip any lines that do not pertain to your business. This guide will help you get a handle on strategic human resource management, its benefits, and how to align HR practices with business goals. Now that you have the form complete, you have options to make sure Uncle Sam receives it. The pin number can be any combination of five digits you choose. And you’ll also need to prepare and file IRS Form 940, the Employer’s Annual Federal Unemployment Tax Return, each year. If you are due to receive a tax refund, then subtract Line 12 from Line 13, then enter the difference here.
In Part 2, you will calculate your FUTA tax before any adjustments. If there is a line that does not apply to you, leave that line blank. If your trade name and the name you used to apply for your EIN are the same, then leave this field blank. At the very top, you’ll include information about the employer, as any specific situations about the employer. And, print your name and title and provide a daytime phone number for the IRS to contact you. 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.
Beware: Quarterly tax payments
Complete all applicable lines on the form, sign it in Part 7, then file it withthe IRS. Also attach a statement to your return showing the name of the person keeping the payroll records and the mailing address where those records will be kept. If this is an amended return that you’re filing to correct a return that you previously filed, check this box. Your FUTA tax liability for the quarter is the total amount of FUTA tax calculated on applicable wages for each employee up to the $7,000 wage base.
PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. Certification as a CPEO may affect the employment tax liabilities of both the CPEO and its customers. To become a CPEO, the organization must apply through the IRS Online Registration System.
FUTA together with state unemployment systems fund payments for unemployed workers. This guide covers who has to file Form 940, when it’s due, and how to accurately complete each line. Currently, the FUTA tax rate is 6.0% and applies to the first $7,000 you paid to each employee as wages during the year. The $7,000 is often referred to as the federal or FUTA wage base. A credit reduction state is one that took loans from the federal government to meet its state unemployment tax liabilities but has not repaid the loans in time.
If your business is new, the IRS will automatically pre-enroll you in EFTPS when you apply for an EIN. Follow the instructions on your EIN package to activate your enrollment. These instructions give you some background information about Form 940.
Credit reduction states must pay the full 6% FUTA tax rate. IRS Form 940 reports your federal unemployment tax liabilities for all employees in one document. Employers must submit the form to the IRS by January 31 of each year if they qualify. If you paid wages that are subject to the unemployment tax laws of a credit reduction state, you may have to pay more FUTA tax when filing your Form 940.
