Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return – Filing and Deposit Requirements

Who Must File Form 940?

You are subject to FUTA tax on the wages you pay employees who are not household or agricultural employees and must file Form 940 (PDF), Employer’s Annual Federal Unemployment (FUTA) Tax Return, for 2012 if:

  • You paid wages of $1,500 or more to employees in any calendar quarter during 2011 or 2012, or
  • You had one or more employees for at least some part of a day in any 20 or more different weeks in 2011 or 20 or more different weeks in 2012. Count all full-time, part-time, and temporary employees. However, if your business is a partnership, do not count its partners.

If your business was sold or transferred during the year, and one of the conditions above applies, you must file Form 940. However, do not include any wages paid by the predecessor employer on your Form 940 unless you are a successor employer. For details, see “Successor employer” in the Form 940 Instructions. If you will not be liable for filing Form 940 in the future, see “Final…” under Type of Return in the Form 940 Instructions. For household employers, see Publication 926 (PDF), Household Employer’s Tax Guide andTopic 756. For agricultural employers, see Publication 51, (Circular A), Agricultural Employer’s Tax Guide, and Topic 760, Reporting and Deposit Requirements for Agricultural Employers.

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

Generally, you can take a credit against your FUTA tax for amounts you paid into state unemployment funds. The credit may be as much as 5.4% of FUTA taxable wages. If you are entitled to the maximum 5.4% credit, the FUTA tax rate after credit is 0.6%. You are entitled to the maximum credit if you paid your state unemployment taxes in full, on time, and on all the same wages as are subject to FUTA tax, and as long as the state is not determined to be a credit reduction state. See the Instructions for Form 940 to determine the credit.

When to File?

The due date for filing the Form 940 is January 31. However, if you deposited all FUTA tax when due, you have until February 10 to file. If the due date for filing a return falls on a Saturday, Sunday or legal holiday, you may 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 legal holidays, see Chapter 11 of Publication 15,(Circular E), Employer’s Tax Guide.

When Must You Deposit Your FUTA Tax?

Although Form 940 covers a calendar year, you may have to deposit your FUTA tax before you file your return. If your FUTA tax is more than $500 for the calendar year, you must deposit at least one quarterly payment. If your FUTA tax is $500 or less in a quarter, carry it over to the next quarter. Continue carrying your tax liability over until your cumulative tax is more than $500. At that point, you must deposit your tax for the quarter. Deposit your FUTA tax by 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 deposit your tax again until the cumulative amount is more than $500.

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

All deposits must be made by electronic funds transfer. Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Refer to Publication 966 (PDF) for Electronic Federal Tax Payment System information and Publication 15, for more information on deposit rules.

Schedule A (Form 940): You must use Form 940, Schedule A (PDF), Multi-State Employer and Credit Reduction Information, if you paid wages to employees in more than one state or if you paid wages in any state that is subject to credit reduction.

Credit Reduction State: This is a state that has not repaid money it borrowed from the federal government to pay unemployment benefits. The Department of Labor determines these states. If an employer pays wages that are subject to the unemployment tax laws of a credit reduction state, that employer must pay additional federal unemployment tax.

Source: Internal Revenue Service
Last reviewed: September 19, 2013