Form 940 Employer’s Annual Federal Unemployment (FUTA) Tax Return

By | April 13, 2014

Form 940 – Annual Statement employer taxes under the Federal Unemployment Tax ( FUTA) – Filing Requirements and Deposit. Use Form 940 to report your annual Federal Unemployment Tax Act (FUTA) tax.


Who is required to file Form 940?

You are subject to tax under FUTA on wages paid to employees who are not household or agricultural character. Taxpayers in this situation must file Form 940 , Employer’s Annual Federal Unemployment (FUTA) Tax Return for 2013 if:

  • You paid wages of $ 1,500 or more employees in any calendar quarter in 2011 or 2012, 2013 or
  • You had one or more employees for at least some part of a day in a period of 20 or more different weeks in 2011 or at any period of 20 or more different weeks in 2013.


Form 940 Employer’s Annual Federal Unemployment (FUTA) Tax Return

If your business is sold or transferred during the year, every employer who answered “Yes” to at least one of the above must file Form 940. However, do not include wages paid by the previous employer on your Form 940 unless you are a successor employer. For details, see “successor employer” in the Instructions for Form 940 . If you do not have the obligation to file Form 940 in the future, see “Final …” under the class declaration in the Instructions for Form 940 .


IRS Publications on FUTA

For household employers, see Publication 926 Household Employer’s Tax Guide (Tax Guide for domestic employers). For agricultural employers, see Publication 51 (Circular A), Agricultural Employer’s Tax Guide (Tax Guide for agricultural employers) and Item 760 ,Reporting & Deposit Requirements for Agricultural Employers (filing and deposit requirements for agricultural employers).


What is the FUTA Tax Rate?

Tax rate FUTA : For 2012, the tax rate FUTA is 6.0%. The tax applies to the first $ 7,000 you paid to each employee as wages during the year. The $ 7,000 constitute the federal salary basis. Your state wage base may be different.

Usually, you can take a credit against your tax FUTA for amounts paid to state unemployment funds. The tax credit can be a maximum of 5.4% of taxable wages as FUTA . If you are entitled to the maximum credit of 5.4%, the tax rate FUTA after the credit is 0.6%. You are entitled to the maximum credit if paid on time the full amount of their state unemployment taxes, and did the same on all wages that are taxable FUTA , and provided that the state was not determined to be a reduction state on credit. See the instructions for Form 940 to determine the credit.


When the Form 940 return must be filed? 

The due date for filing Form 940 is January 31. However, if you deposited all tax FUTA to its expiration date, you have until February 10 to file the return. If the due date of a statement is a Saturday, Sunday or legal holiday, you can file the return on the next business day. The term “legal holiday” means any legal holiday in the District of Columbia.

For a list of public holidays, see Publication 15 , (Circular E), Employer’s Tax Guide (Guide to the employer’s tax obligations).


When should you deposit your FUTA ?

Although Form 940 covers a calendar year, you may have to deposit your FUTA before you file your return. If your FUTA is over $ 500 per calendar year, you must deposit at least one quarterly payment. If your FUTA is $ 500 or less in a quarter,  move it to the next quarter. Continue moving your tax liability until their cumulative tax is more than $ 500. At that point, you must deposit your tax for the quarter. Deposit your FUTA l taxa later than the last day of the month after the end of the quarter. If your tax for the next quarter is $ 500 or less you are not required to register your tax again until the cumulative amount is over $ 500.

If  a taxpayer is required to make a deposit on a day that is not a working day, the deposit is considered timely if made not later than the close of the next business day. A working day is all day other than a Saturday, Sunday or legal holiday. For example, if it is required to make a deposit on a Friday and that Friday is a legal holiday, the deposit is considered timely if made on the following Monday (if that Monday is a working day).

All deposits must be made ​​by electronic funds transfer. Generally, electronic funds transfers are made ​​using the electronic payment system of federal taxes.Refer to Publication 966  that contains information about the system electronic payment of federal taxes and Publication 15, (Circular E), Employer’s Tax Guide (Tax Guide for the employer) for more information about the rules deposit.


Filing FUTA Form with IRS

Schedule A (Form 940). has to use the Schedule A (Form 940) , Multi-State Employer and Credit Reduction Information (Information for employers with staff in multiple states and credit reduction) if you paid wages employees in more than one state or paid wages in a state subject to credit reduction.

State credit reduction: There are certain state that have not repaid money it borrowed from the federal government to pay unemployment benefits. The Department of Labor determines what those states are. If an employer pays wages that are subject to the unemployment tax laws of a state credit reduction, the employer must pay additional federal unemployment tax.


State Unemployment Information

Contact your state unemployment insurance office to receive your state reporting number, state experience rate, and details about your state unemployment tax obligations. 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. Do not collect or deduct FUTA tax from your employees’ wages.