Form 940

Employers have many responsibilities on their plate. Aside from running a business, making customers and employees happy, and meeting business targets, taking care of tax liabilities is essential. While it is true that you can hire somebody to do all the admin tasks for you, it is best that you also know what goes on in filing and paying taxes. Do you know what Form 940 is? 

What is Form 940? 

Form 940 is a form from the Internal Revenue Service (IRS). Also called the “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” Form 940 is an annual report on federal unemployment taxes that employers are required to file. Through Form 940, employers report and pay unemployment taxes for their employees. Unemployment taxes are not taken from the wages of the employees. It is the responsibility of employers to fund unemployment taxes. 

What is the purpose of filing Form 940?

Form 940 is used to compute an employer’s federal unemployment tax obligation based on the annual payroll. The Federal Unemployment Tax Act (FUTA) is a payroll tax that is used to fund a federal program that provides unemployment benefits to eligible workers who lost their jobs. This tax is paid by employers. This is a program that works in tandem with state unemployment tax. 

Presently, the FUTA tax rate is 6% and applies to the first $7,000 the employer paid to each employee as wages.

I am a business owner. Must I file Form 940?

If you are a business owner, you are required to file Form 940 if: 

• If you paid wages of $1,500 or more to your employees in any calendar quarter during 2019 or 2020;
• If you had one or more employees work for your business for at least some part of a day in any twenty or more different weeks in 2019 or twenty or more different weeks in 2020.

Employees who are part-time, full-time, and temporary are counted. These employees must not be household or agricultural employees. For businesses that are partnerships, do not count the partners. 

Where can you get Form 940? 

Employers can download Form 940 at the Internal Revenue Service (IRS) website. It is possible to fill it out electronically on the website or download it for printing. 

I am a business owner. When should I file Form 940? 

According to the IRS, January 31 is the due date for filing Form 940 for the previous year. This means that, for example, an employer filing taxes for 2019 must file Form 940 not later than January 31, 2020.

In case the deadline falls on a weekend or a legal holiday, you can file on the next business day. However, if the employer has already paid their FUTA tax, they can have until February 10 to file Form 940. 

How can I file Form 940? 

There are two ways that you can file Form 940. The first option is to mail Form 940. Before sending, be sure to check the IRS website for the list of addresses for each state. It will also give you the address to use if you are sending a payment together with Form 940. 

Another option to filing Form 940 is to e-file. However, you can either use an authorized IRS e-file provider or buy an IRS-approved software to electronically file Form 940 yourself. Another option is to have a tax professional file Form 940 for you.

I am a business owner. When should I deposit my FUTA Tax? 

In some cases, depositing FUTA tax is done before filing Form 940. When does this happen? 

• If your FUTA tax is more than $500 for the calendar year, you have to deposit at least one quarterly payment. 
• If your FUTA tax due is less than $500 in one quarter, you can carry it over to the next quarter. Carrying the unpaid balance over to the next quarter is allowed until you reach a cumulative FUTA tax liability of more than $500. Once you reach this point, you can deposit FUTA tax for the quarter. Deposit the FUTA tax by the last day of the month after the quarter-end. 
• If your FUTA tax is $500 or less for the calendar year, you can opt to deposit the amount due or pay this together with your Form 940 on or before January 31. 

How do I deposit my FUTA tax? 

If your FUTA tax due for a quarter or your cumulative FUTA tax due reaches more than $500, you can deposit the tax via electronic funds transfer. To do this, you must use the Electronic Federal Tax Payment System (EFTPS). 

If a deposit is needed to be made on a day that is not a business day (Saturday, Sunday, or legal holiday), it will still be considered on time if it is deposited before the end of the next business day. 

What are some tips to avoid penalties and interest? 

Certain penalties and interest may be charged for late payment of taxes and late filing of returns. Here are some tips for employers to avoid penalties and interest:

• As with any personal or business payment, it is best to deposit and pay your tax when it is required. 
• Accomplish your Form 940 accurately and completely.
• File your Form 940 on or before the deadline.
• Do not forget to attach Schedule R (Form 940) if it is needed.