Form 940

Employer's Annual Federal Unemployment Tax Return

Annual

What Form 940 is for

Form 940 reports federal unemployment tax under FUTA. It is filed once a year, and it is the one employment tax an employer pays entirely itself - nothing on this return is withheld from an employee's wages. FUTA works alongside state unemployment systems: an employer that paid its state unemployment contributions on time generally claims a credit that reduces the federal rate substantially, which is why the return asks about state contributions before arriving at the amount due.

Who files it

Employers who paid $1,500 or more in wages in any calendar quarter
Employers who had one or more employees for any part of a day in 20 or more different weeks
Agricultural and household employers, under separate tests

Schedules that attach to it

Schedule A (Form 940)

Multi-State Employer and Credit Reduction Information

Filed by employers who paid wages in more than one state, or in a credit reduction state.

Schedule R (Form 940)

Allocation Schedule for Aggregate Form 940 Filers

Filed by an aggregate filer to allocate the return across the clients it files for.

Deposit schedule

Whether you deposit monthly or semiweekly depends on your lookback period, not on this form. Publication 15 (Circular E) sets the rule, and it is worth checking each year - the schedule can change when your liability does.

IRS Publication 15

Common questions

Is FUTA withheld from employee wages?

No. FUTA is an employer-paid tax. Withholding it from an employee's pay is not permitted.

How do I correct a Form 940?

There is no separate 940-X. You file a corrected Form 940 for the year, using the form revision for that year and marking it as an amended return.

What is a credit reduction state?

A state that has an outstanding federal unemployment loan. Employers with wages in one lose part of the usual FUTA credit, so their effective rate is higher. Schedule A is where that is worked out.