The IRS 940 form is an essential document used by employers to report their annual Federal Unemployment Tax Act (FUTA) tax. This tax contributes to the costs of admini
For many employers, navigating the complexities of tax filings is a yearly challenge that can not only consume time but also require a deep understanding of various forms and their purposes. Among these, the IRS 940 form stands out as a crucial document, designed to report annual Federal Unemployment Tax Act (FUTA) tax. This form plays a pivotal role in ensuring that employers fulfill their obligations in contributing to the unemployment funds at the federal level, which in turn, supports workers who find themselves unemployed. The importance of accurately completing and submitting this form cannot be overstated, as it directly impacts the financial health and compliance status of businesses. Throughout the year, employers must keep a meticulous record of the wages paid to employees, which serves as the foundation for calculating the FUTA tax. Despite its significance, many employers find themselves grappling with questions about eligibility, deadlines, and specific lines on the form, highlighting the need for a comprehensive understanding of the IRS 940 form's requirements, benefits, and potential pitfalls.
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.
Filling out the IRS 940 form is a task that requires attention to detail and an understanding of your business's annual operations in relation to unemployment taxes. This form is a way for employers to report their annual Federal Unemployment Tax Act (FUTA) tax. Completing this form accurately is crucial for compliance with federal tax obligations. The steps below are designed to guide employers through the process, ensuring that they provide all the necessary information required by the Internal Revenue Service (IRS).
Once the IRS 940 form is accurately completed and submitted, employers have fulfilled their annual obligation to report and pay federal unemployment taxes. It's important to keep a copy of the form and all related documents for at least four years for potential future reference or IRS inquiries. Timely and accurate submission helps avoid penalties and ensures compliance with federal tax regulations.
What is the IRS 940 form used for?
The IRS Form 940 is a federal document used annually by employers to report their unemployment tax liabilities. Specifically, the form calculates the amount of Federal Unemployment Tax Act (FUTA) tax the employer owes. FUTA tax, alongside state unemployment systems, funds unemployment compensation to workers who have lost their jobs.
Who is required to file the IRS 940 form?
Employers who pay wages of $1,500 or more in any calendar quarter or have had one or more employees for at least some part of a day in any 20 weeks in a calendar year must file the IRS 940 form. These criteria apply regardless of whether the employees are full-time, part-time, or temporary.
When is the IRS 940 form due?
The IRS 940 form is due on January 31st of the year following the reported year. For instance, for wages paid during the 2022 tax year, the form would be due by January 31, 2023. If an employer makes all FUTA tax payments on time, the deadline for filing the form can be extended to February 10th.
How do unemployment taxes differ from other types of employment taxes?
Unemployment taxes, governed by the FUTA, are distinctly employer-paid taxes and are not deducted from employees' wages. This contrasts with other employment taxes, such as Social Security and Medicare taxes, which are shared by the employer and employee. The primary purpose of FUTA tax is to fund state workforce agencies that provide unemployment benefits to individuals who have lost their jobs.
What information is required to complete the IRS 940 form?
Completing the IRS 940 form requires information on the total amount of annual wages paid, the amount of wages subject to FUTA tax, and FUTA tax deposits made throughout the year. Employers must also reconcile their quarterly wages and tax liabilities to ensure accuracy in reporting and paying the FUTA tax.
Can the IRS 940 form be filed electronically?
Yes, the IRS encourages employers to file the 940 form electronically for efficiency and accuracy. Employers can use the IRS e-file system or third-party tax preparation software to submit the form. Electronic filing can also provide confirmation that the IRS has received the form, a benefit not always available with paper filings.
What are the penalties for not filing the IRS 940 form on time?
Failure to file the IRS 940 form on time can result in late filing penalties and interest charges on any unpaid tax. The penalty is generally 5% of the unpaid tax for each month or part of a month that the form is late, up to a maximum of 25%. Additionally, interest accrues on unpaid taxes from the due date until the amount is paid in full.
How can an employer correct a mistake made on a previously filed IRS 940 form?
If an employer discovers an error on a previously filed IRS 940 form, they can file an amended return using Form 940-X, Adjusted Employer's Annual Federal Unemployment (FUTA) Tax Return or Claim for Refund. The form allows for corrections to previously reported information and calculation of the correct amount of FUTA tax.
Are there any special considerations for multi-state employers?
Multi-state employers must comply with specific considerations when filing the IRS 940 form. They must determine their FUTA tax liability for each state where their employees worked. If an employer pays state unemployment taxes in a timely manner and in full, they may be eligible for a credit of up to 5.4% against their FUTA tax liability. This requires detailed tracking and accurate reporting of wages paid in each state.
Filling out the IRS 940 form, also known as the Employer's Annual Federal Unemployment (FUTA) Tax Return, can be tricky. Many individuals make mistakes that can lead to delays or even penalties. One common error is not calculating FUTA tax correctly. This tax is critical for providing funds to workers who have lost their jobs. However, the calculation involves understanding which wages are taxable and applying the correct rate. Missteps here can mean either overpaying or underpaying your taxes.
Another frequent mistake is not taking advantage of all the credits available. Employers can often reduce their FUTA tax liability by taking credit for state unemployment taxes paid. Failing to apply these credits correctly or overlooking them entirely can result in unnecessarily high tax payments. It's essential to review all potential credits thoroughly and ensure you meet the criteria to qualify.
Incorrectly reporting employee wages is also a common issue. The IRS requires employers to report the wages paid to employees accurately. This includes following specific definitions for what constitutes wages under FUTA guidelines. Sometimes, employers mistakenly include payments that should not be taxed or omit ones that should. Such inaccuracies can complicate matters, potentially leading to audits or reassessments.
Forgetting to file on time is another pitfall. The IRS 940 form has a specific due date, and missing this deadline can attract penalties. Time management is crucial when it comes to tax submissions. Procrastination or simple forgetfulness can end up costing much more in penalties and interest. Setting reminders or working with a professional can help ensure you meet all filing requirements timely.
Lastly, many people overlook the need to update their form for changes in their business. Expanding your business, hiring new employees, or changing your business structure can affect your FUTA tax responsibilities. Using outdated information when filling out the form can lead to inaccuracies that might trigger IRS inquiries or audits. Regularly reviewing and updating your business information is key to avoiding such oversights.
When businesses navigate their tax responsibilities, the IRS Form 940, which reports federal unemployment tax, is often just the starting point. There are several additional forms and documents that businesses regularly manage alongside Form 940 to ensure compliance and accurate financial reporting. Each one addresses different aspects of a company's tax and payroll obligations, making them essential components of the broader tax landscape.
Understanding and accurately filing these forms, along with the IRS Form 940, is fundamental for maintaining compliance and avoiding penalties. While Form 940 focuses on unemployment taxes, the other documents cover a wide range of tax reporting requirements, from employee income to Medicare and Social Security taxes. Proper management of these forms reflects the complex nature of business operations and their corresponding tax obligations.
The IRS 940 form, used for reporting annual Federal Unemployment Tax Act (FUTA) tax, shares similarities with the IRS 941 form, which is used for reporting quarterly federal tax returns. Both forms are essential for employers to report taxes related to employment, albeit on different schedules and for different purposes. The 941 form deals with the withholding of income taxes, Social Security, and Medicare from employee's paychecks, whereas the 940 focuses on unemployment taxes that employers pay on behalf of their employees.
Another document related to the IRS 940 is the IRS Form 944, designated for small employers to file their annual federal tax returns. This form allows smaller businesses, which have lower employment tax liabilities, to file annually instead of quarterly, simplifying the tax reporting process. While the 944 shares the annual filing aspect with the 940 form, it encompasses withheld federal income tax as well as Social Security and Medicare taxes, contrasting with the 940's focus on unemployment contributions.
The IRS Form W-2 is an annual wage and tax statement that employers must send to each of their employees and the Social Security Administration. This form reports an employee's annual wages and the amount of taxes withheld from their paycheck. The W-2 is similar to the 940 in that both involve annual reporting requirements related to employment but serve different purposes. The W-2 facilitates employee's tax return filings, while the 940 is an employer's annual report on owed unemployment taxes.
State Unemployment Tax Act (SUTA) forms, though they vary by state, also bear resemblance to the IRS 940 form. Both SUTA and IRS 940 involve the collection of unemployment insurance taxes from employers, but while IRS 940 pertains to federal unemployment taxes, SUTA forms are concerned with state-level unemployment contributions. This difference underscores the dual-layer system of unemployment insurance in the United States, where employers must contribute to both state and federal unemployment insurance programs.
The IRS 1099 forms, particularly the 1099-MISC and 1099-NEC, are used to report payments made in the course of a business to individuals who are not employees, such as independent contractors. Similar to the 940 form, 1099 forms are integral to yearly tax reporting and compliance. However, while the 940 focuses on employment taxes paid by the employer, the 1099s concern payments made to non-employees and the associated reporting requirements.
The IRS Form W-4 is an employee's withholding allowance certificate, used by employers to determine the correct amount of federal income tax to withhold from employees' paychecks. It connects to the IRS 940 in the broader context of employment tax obligations. Although the W-4 primarily aids in calculating withholdings rather than reporting taxes, it directly impacts the annual tax reporting and withholding processes, tying into the obligations underlined by forms like the 940 and 941.
Lastly, the IRS Form W-3, which is a transmittal of wage and tax statements, accompanies the W-2 forms sent to the Social Security Administration. The W-3 summarizes the information on the individual W-2 forms, providing a collective report on employee wages and taxes withheld. While the W-3 and the 940 form serve different functions, both are crucial for annual tax reporting regarding employment. The W-3 compiles employee tax withholdings, and the 940 details employer contributions to federal unemployment taxes.
Filling out the IRS 940 form, which is used for reporting your annual Federal Unemployment Tax Act (FUTA) tax, is a crucial task that requires attention to detail and understanding of the requirements. To ensure accuracy and compliance with the IRS instructions, here are several dos and don'ts to keep in mind.
Ensure all information is complete and accurate, including your Employer Identification Number (EIN), the state where your employees worked, and your business's contact information.
Calculate your FUTA tax liability carefully, taking into account the gross wages you've paid, and ensure that any payments made to the IRS throughout the year are accurately reported.
Report state unemployment contributions accurately. If you've paid into state unemployment funds, this could credit against your FUTA tax.
Check for any changes in FUTA tax rates or wage bases for the filing year, as these can affect your tax liability.
Utilize the IRS instructions for form 940 to help guide you through each section and ensure that you're filling it out correctly.
Sign and date the form. An unsigned form is similar to not filing at all and could result in penalties.
Keep a copy for your records. It’s important to have detailed financial records, including filed tax forms and calculations used to determine your FUTA tax liability.
Don't rush through the form without verifying each section for accuracy. Mistakes can lead to audits or penalties.
Don't forget to include exempt payments when calculating your total FUTA tax. Certain types of payments are exempt from FUTA tax, and not accounting for these can result in overpayment.
Don't file late. Late filing can result in penalties and interest charges on any unpaid tax due.
Don't neglect to check for state-specific forms or requirements. Some states have specific requirements that could affect how you complete your IRS 940 form.
Don't guess on numbers or make estimates. Use exact figures to ensure your tax liability is calculated correctly.
Don't disregard the importance of state unemployment taxes. These contributions can impact your FUTA tax liability and potential credits.
Don't hesitate to seek professional help if you're unsure about any aspect of your IRS 940 form. Professional advice can prevent costly errors.
Understanding the IRS 940 form is crucial for businesses, but there are several misconceptions that can lead to confusion. Here, we'll clear up some common misunderstandings to help ensure you're on the right track.
Only large businesses need to file Form 940. This is a misconception. The IRS requires all employers who pay wages of $1,500 or more in any calendar quarter, or had one or more employees for at least some part of a day in any 20 or more different weeks in a year, to file Form 940.
Filing Form 940 is the same as filing Form 941. This is not true. Although both forms are related to employment taxes, Form 940 is used specifically for reporting annual Federal Unemployment Tax Act (FUTA) taxes, while Form 941 is used to report quarterly federal income tax withholdings and FICA taxes (Social Security and Medicare).
You only file Form 940 if you owe unemployment taxes. This misunderstanding can lead to non-compliance. Even if you don't owe any FUTA tax because you’ve made all the necessary deposits on time, the IRS still requires you to file Form 940 to report your annual unemployment tax information.
If your business didn't pay wages that year, you don't have to file Form 940. If your business was active and met the requirements in previous years, you must still file Form 940, even if you did not pay wages in the current year. This informs the IRS that your business had no wage payments and calculates your FUTA tax accordingly.
Form 940 is complicated and requires an accountant to file. While having an accountant or professional prepare your business taxes can be helpful, Form 940 is designed to be straightforward. The IRS provides instructions and resources that can guide you through the process if you choose to do it yourself.
Electronic filing of Form 940 is optional. The IRS encourages electronic filing for all its forms for accuracy and efficiency reasons. Businesses of certain sizes may be required to file electronically, so it’s important to check the latest IRS guidelines to determine if this applies to you.
You can file Form 940 at any time during the year. This is incorrect. Form 940 is due annually, with the deadline typically being January 31st of the year following the reported year. If all FUTA tax due was paid on time, the deadline extends to February 10th. Filing late can result in penalties and interest charges.
Paying FUTA tax is the only requirement to comply with federal unemployment tax obligations. Paying the tax is essential, but proper and timely filing of Form 940 is also required. Additionally, you must deposit unemployment taxes quarterly, which Form 940 reporting will verify.
By dispelling these misconceptions, you can approach Form 940 with confidence and ensure compliance with federal tax obligations, avoiding unnecessary penalties and contributing to the overall financial health of your business.
The IRS 940 form, officially known as the Employer's Annual Federal Unemployment (FUTA) Tax Return, is a critical document for employers. It is used to report annual federal unemployment taxes. Employers must fill it out accurately to ensure compliance with federal regulations. Here are five key takeaways to consider when dealing with the IRS 940 form:
Completing the IRS 940 form is a straightforward process when you understand the requirements. Proper attention to detail and adherence to filing deadlines are essential to comply with federal unemployment tax obligations.
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