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Form 940 is a tax form used by employers to report their annual Federal Unemployment Tax Act (FUTA) tax liability. FUTA tax is a federal tax that employers must pay to fund unemployment benefits for workers who have lost their jobs.

The Form 940 is filed annually and is due by January 31st of the following year. It is used to calculate the amount of FUTA tax owed by the employer based on their taxable wages and other factors. The form also includes information about any state unemployment taxes paid by the employer. Few common challenges that employers may face when filing Form 940 are:
 
1. Understanding the requirements: The instructions for Form 940 can be complex, especially for first-time filers. It’s important to carefully read and understand the instructions to ensure accurate completion of the form.
2. Calculating the FUTA tax liability: Calculating the FUTA tax liability can be challenging, especially if you have employees in multiple states or if you have made certain adjustments to your payroll. It’s crucial to accurately calculate the tax owed to avoid penalties or interest.
3. Keeping track of state unemployment tax credits: Some employers may be eligible for a credit against their FUTA tax liability if they have paid state unemployment taxes. Keeping track of these credits and properly applying them on Form 940 can be a challenge.
4. Meeting deadlines: Form 940 must be filed annually by January 31st of the following year. Missing the deadline can result in penalties and interest. It’s important to stay organized and plan ahead to ensure timely filing.
5. Changes in employment status: If you have employees who have left your company or if you have hired new employees during the year, accurately reporting their wages and employment status on Form 940 can be challenging. It’s important to keep accurate records and update the form accordingly.
 
To overcome these challenges, it may be helpful to consult with our tax professionals. Additionally, staying updated on any changes to tax laws and regulations can help ensure compliance when filing Form 940.
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Form 940 General Process

1. Employers must file Form 940 if they paid wages of $1,500 or more in any calendar quarter during the current or previous year, or if they had one or more employees for at least some part of a day in any 20 or more different weeks in the current or previous year.
2. We will collect the required information, including your employer identification number (EIN), total wages paid to employees, any exempt wages, and any FUTA tax already paid and will calculate your FUTA tax liability based on the instructions provided with Form 940. The tax rate is 6% on the first $7,000 of each employee's wages, but you may be eligible for a credit of up to 5.4% if you paid state unemployment taxes on time.
3. Fill out the Form 940 accurately and completely, providing the requested information, including your business details, wages paid, and any FUTA tax owed or already paid.
4. There are two options for filing Form 940. We can either mail it to the appropriate IRS address or file it electronically using the IRS e-file system. Electronic filing is generally faster and more convenient.
5. If you owe FUTA tax, then make sure to pay it by the due date. You can pay electronically using the Electronic Federal Tax Payment System (EFTPS), by credit or debit card, or by check or money order. If your FUTA tax obligation exceeds $500 for the entire year, then you are required to make at least one quarterly payment. However, if your FUTA tax liability is $500 or less in a particular quarter, then you can carry it over to the following quarter.

Instructions for Form 940

Form 940

Form 940

Download PDF version of Form 940

Instructions for Form 940

Instructions explaining how to file Form 940.

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