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Form 940 vs 941: What Each Form Reports, Who Files, and Due Dates

940 vs 941 What’s The Difference

Employers deal with two main federal payroll taxes each year. One is FUTA, which funds unemployment benefits. The other is the payroll taxes reported on Form 941: federal income tax withholding, plus Social Security and Medicare taxes (FICA). FICA is only Social Security and Medicare—federal income tax withholding is separate.

Although both come out of payroll, they are treated as separate taxes and follow different rules and filing schedules.

The IRS forms used to report these obligations are Form 940 and Form 941. Most businesses are confused by their reporting requirements, deadlines, and deposit rules. This IRS form comparison guide presents a clean, structured comparison of both forms and provides real scenarios to help employers remain compliant.

Form 940: What It Is, Who Must File, and Why It Matters

Form 940 is the IRS’s annual FUTA return. It reports the employer’s federal unemployment tax on up to the first $7,000 of wages per employee (after removing FUTA-excluded payments).

Who Must File

You generally have a Form 940 filing obligation if either of these is true:

  • You paid $1,500 or more in wages in any calendar quarter (current or prior year), or
  • You had one or more employees for any part of a day in 20 or more different weeks (current or prior year).

Most household employers report household employment taxes on Schedule H (Form 1040) rather than Form 940. But if you also have non-household employees, you may choose to report FUTA for your household employees on Form 940—and if you do, you must also file Form 941, 943, or 944 to report the Social Security and Medicare taxes and any federal income tax withholding for those household employees.

Form 940 Purpose: Why It Matters

FUTA helps fund the unemployment system, and Form 940 is where the employer calculates the final annual FUTA tax. Employers can usually reduce the effective FUTA rate by claiming the credit for timely state unemployment tax payments (up to 5.4%), which is why many employers end up at an effective 0.6% rate (subject to credit-reduction rules). However, employers in a FUTA credit reduction state may owe additional FUTA tax because the normal state credit is reduced.

Key Lines and Schedules to Know

  • Core calculation lines (Form 940): The calculation section walks you through taxable FUTA wages, credits, and any credit-reduction amount.
  • Schedule A (Form 940): Use this when you’re a multi-state employer and/or you have wages in a credit-reduction state. It’s filed with Form 940 and computes the credit-reduction amount.
  • Schedule R (Form 940): Used when you file an aggregate Form 940 to allocate amounts to clients (for example, approved section 3504 agents filing as agents of home care service recipients and CPEOs filing an aggregate Form 940 for customers).

Deposit Rule

FUTA isn’t deposited with every payroll. You must deposit FUTA tax when your undeposited FUTA liability is more than $500 at the end of a quarter (including any amount carried forward from earlier quarters). If it’s $500 or less, carry it forward until the total is more than $500. Deposits are due by the last day of the month after the quarter ends and must be made by electronic funds transfer (EFT).

Common Adjustments and Exclusions

Typical FUTA adjustments come from FUTA-excluded payments and credit-reduction state rules (which increase FUTA due). The IRS instructions outline the categories and where they flow in the calculation.

Form 941: What It Is, Who Must File, and Why It Matters

Form 941 is the IRS’s quarterly payroll tax return. It reports:

  • Federal income tax withheld from employee pay, and
  • The quarter’s Social Security and Medicare taxes (both the employee and employer shares), plus any Additional Medicare Tax withheld.

Who Must File Form 941

Most employers file Form 941 each quarter if they pay wages subject to federal income tax withholding or Social Security/Medicare taxes. After you file your first Form 941, you generally must keep filing every quarter (even for quarters with no taxes to report) unless you qualify as a seasonal employer or you file a final return.

Common exceptions:

  • File Form 944 instead of Form 941 only if the IRS notifies you in writing that you’re an annual filer.
  • Form 943 is for wages paid for agricultural labor (farmworkers); don’t report those wages on Form 941.
  • Form 945 is for nonpayroll federal income tax withholding (for example, backup withholding), not Form 941.

Form 941 Purpose: Why it Matters

Form 941 is how the IRS reconciles what you reported for the quarter with your required deposits. If reported liability doesn’t line up with deposit timing (and, when required, the liability schedule), you can trigger deposit penalties and IRS correspondence—especially for larger or higher-frequency depositors.

Key Lines and Attachments

  • Lines 2–3: Total wages/tips and federal income tax withheld.
  • Lines 5a–5d: Social Security wages/tips, Medicare wages/tips, and wages subject to Additional Medicare withholding. Line 5e has the total amount of the Social Security and Medicare taxes.
  • Lines 7–9: Core quarterly adjustments (fractions of cents, sick pay, tips, group-term life).
  • Schedule B (Form 941): This is required for semiweekly depositors and for employers that hit the $100,000 next-day deposit rule. Note that this reports tax liability by date, and not by deposits.
  • Schedule R (Form 941): Attach this if you are filing an aggregate Form 941/941-X to allocate amounts by clients (like approved section 3504 agents and CPEOs filing aggregate returns).

2025 Wage Base and Rates

Social Security tax: For 2025, Social Security is withheld at 6.2% from the employee and matched with another 6.2% by the employer. That Social Security portion only applies to each employee’s wages up to $176,100 for the year.

Medicare tax: Medicare is withheld at 1.45% from the employee and matched with 1.45% by the employer. Unlike Social Security, there’s no annual wage limit for Medicare.

Additional Medicare Tax: Employers must withhold an extra 0.9% from the employee’s pay once that employee’s wages go over $200,000 (this additional amount is employee-only—the employer doesn’t match it).

Special Note on Third-Party Sick Pay

Third-party sick pay reporting depends on whether the third party transfers liability under IRS rules. If liability is not transferred, the third party reports and deposits the related taxes under its EIN, and the employer generally has no employment tax responsibilities for that sick pay. But, if liability is transferred, the employer reports the wages on Form 941 (using the required sick pay adjustment mechanics), and the employer includes those sick pay wages in FUTA reporting on Form 940, as applicable.

FUTA vs FICA Reporting: Key Differences

Key characteristic IRS Form 940 (Annual) IRS Form 941 (Quarterly)
Primary taxes reported FUTA (Federal Unemployment Tax) Federal income tax withholding plus Social Security and Medicare taxes
Who pays the tax Employer-only (FUTA is not withheld from employees) Both: employee amounts are withheld, and the employer matches Social Security and Medicare
Filing frequency Annually (once per year) Quarterly (four times per year)
Wage base / limits FUTA generally applies to the first $7,000 of wages per employee per year Social Security applies up to the annual wage base (2025: $176,100; 2026: $184,500). Medicare has no wage cap. Additional Medicare Tax applies once wages exceed $200,000.
Standard rates 6.0% statutory FUTA rate; typically reduced to 0.6% after maximum state credit (credit-reduction states increase the net rate) Social Security: 6.2% employee + 6.2% employer (up to wage base). Medicare: 1.45% employee + 1.45% employer. Additional Medicare: 0.9% employee-only
Deposit trigger / schedule Deposit required when undeposited FUTA liability exceeds $500; due by the last day of the month after quarter-end Monthly or semiweekly schedule based on lookback period; $100,000 next-day deposit rule can override
Standard filing due dates Usually January 31. For TY 2025: Feb 2, 2026 (or Feb 10, 2026 if all FUTA deposits were made on time) Last day of the month after quarter-end (Apr 30, Jul 31, Oct 31, Jan 31). If deposits are timely, may file by the 10th day of the following month
Common supporting schedules Schedule A (credit reduction / multi-state), Schedule R (aggregate filers) Schedule B (semiweekly / $100k rule), Schedule R (aggregate filers)
What the tax funds Federal unemployment program funding framework Social Security and Medicare trust funds, plus federal income tax remitted to the Treasury

Deadlines & Deposit Rules Made Easy

Here’s a simple reference for FUTA (Form 940) and payroll tax (Form 941) deposit timing and filing deadlines.

Form 940 Deadline & Deposit Schedule

What to do Simple rule
Track liability Add up FUTA as you run payroll each quarter and carry any unpaid amount forward.
When a deposit is required If your cumulative, undeposited FUTA liability is more than $500 at the end of a quarter (including carryforward), you must deposit. If it’s $500 or less, carry it forward to the next quarter.
Deposit due date When a deposit is required, pay it by the last day of the month after the quarter ends.
File Form 940 File by February 2, 2026. If all FUTA deposits were made on time, you may file by February 10, 2026.

Form 941 Due Dates & Deposit Schedule

Steps Form 940 (FUTA) Form 941 (Payroll taxes)
1. Pull reports Year-end payroll totals, taxable fringe benefits, and any FUTA-exempt payments. Quarterly payroll totals, tips, taxable fringe benefits, and federal income tax withheld.
2. Segregate taxable wages Apply the FUTA wage base (first $7,000 per employee) and remove FUTA-exempt items. Separate Social Security and Medicare wages; track the Social Security wage base and Additional Medicare after $200,000.
3. Reconcile liability to deposits Match FUTA liability to EFTPS deposits or carryforward; confirm whether the $500 trigger was met. Match liability to EFTPS deposits based on monthly/semiweekly rules and confirm next-day deposits if $100,000 was triggered.
4. Complete form and schedules Prepare Form 940; add Schedule A for credit-reduction/multi-state cases; Schedule R only for aggregate filers. Prepare Form 941; add Schedule B when required; Schedule R only for aggregate filers.
5. E-file and retain proof E-file and retain IRS acknowledgment, filed PDF, and payroll/deposit records for 4+ years. E-file and retain IRS acknowledgment, filed PDF, and payroll/deposit records for 4+ years.

Important Note: If a filing or deposit due date falls on a weekend or legal holiday, it moves to the next business day. For deposits, “legal holiday” means a holiday in Washington, D.C.

Tips for smooth deposits

  • Put EFTPS (or your payroll system) on calendar reminders for each deposit deadline.
  • Keep FUTA and 941 tax tracking separate in your books so quarter-end tie-outs (and Schedule B, if required) don’t get mixed up.
  • Re-check whether any states are credit-reduction states before finalizing Form 940 (that’s what changes FUTA owed).
  • Note: The “10 returns in aggregate” mandate applies to many information returns (like W-2/1099-series), and it’s separate from 940/941 deposit timing.

Five-Step Filing Checklist for Forms 940 and 941

Steps Form 940 (FUTA) Form 941 (Payroll taxes)
1. Pull reports Year-end payroll totals, taxable fringe benefits, and any FUTA-exempt payments. Quarterly payroll totals, tips, taxable fringe benefits, and federal income tax withheld.
2. Segregate taxable wages Apply the FUTA wage base (first $7,000 per employee) and remove FUTA-exempt items. Separate Social Security and Medicare wages; track the Social Security wage base and Additional Medicare after $200,000.
3. Reconcile liability to deposits Match FUTA liability to EFTPS deposits or carryforward; confirm whether the $500 trigger was met. Match liability to EFTPS deposits based on monthly/semiweekly rules and confirm next-day deposits if $100,000 was triggered.
4. Complete form and schedules Prepare Form 940; add Schedule A for credit-reduction/multi-state cases; Schedule R only for aggregate filers. Prepare Form 941; add Schedule B when required; Schedule R only for aggregate filers.
5. E-file and retain proof E-file and retain IRS acknowledgment, filed PDF, and payroll/deposit records for 4+ years. E-file and retain IRS acknowledgment, filed PDF, and payroll/deposit records for 4+ years.

Time-saver Tip: If you file through Tax1099, Smart Validation can flag mismatches between expected liability and entered deposit totals before submission, so you correct gaps early.

Common Errors and How to Avoid Them

Mistake What it can trigger How to avoid / fix
Filing Form 944 without IRS approval Missing quarterly filings and late penalties File Form 941 each quarter unless IRS explicitly authorizes Form 944.
Skipping a quarter with low or no payroll Late-file penalties and IRS notices Continue filing until a final return or seasonal filer status applies.
Reporting farm wages on Form 941 Discrepancy notices and corrections Report agricultural wages on Form 943; correct errors via Form 941-X.
Missing FUTA credit-reduction tax Underpaid FUTA, penalties, and interest Check credit-reduction states and complete Schedule A on Form 940.
Wrong 941 deposit schedule Late-deposit penalties Recalculate depositor status annually using the IRS lookback period.
Incorrect Schedule B entries IRS follow-ups and penalty reviews Schedule B must show liability by pay date—not deposit date.
Mixing FUTA and FICA wage rules Incorrect tax calculations Track FUTA, Social Security, and Medicare wages separately.
Treating employees as contractors Back taxes, penalties, audits Reassess worker status and correct prior filings promptly.

Real-Life Scenarios

Scenario Correct Form(s) Explanation
Year-round employees Form 940 and Form 941 Many employers file both: Form 940 covers FUTA annually, and Form 941 reports federal income tax withholding plus Social Security and Medicare each quarter.
No wages in a quarter Form 941 required (most cases) Once you begin filing Form 941, you generally must continue filing each quarter even with zero wages, unless you qualify as a seasonal employer for that quarter or you are filing a final return.
Household employer Schedule H with Form 1040 (common) Household employment taxes are usually reported on Schedule H. If you also file Form 941, 943, or 944 for business employees, you may include household employee taxes on those business returns instead of Schedule H.
Large liability spike Form 941 (next-day deposit rule applies) If payroll tax liability reaches $100,000 or more on any day, you must deposit by the close of the next business day, regardless of whether you are normally a monthly or semiweekly depositor.
Credit-reduction state employer Form 940 (with credit-reduction computation) If you are FUTA-liable and paid wages in a credit-reduction state, your FUTA credit is reduced and the net FUTA due increases, typically computed on Schedule A and carried to Form 940.

FAQs

1. Is Form 940 required when the net FUTA is $0?

Yes—if the employer is subject to FUTA and meets the Form 940 filing test, it must file Form 940 even if the net FUTA tax due is $0.

2. Can a payer switch from 941 to 944 automatically?

No. An employer may file Form 944 only if they are eligible or required to file Form 944 through a written notice from the IRS. Otherwise, they must file Forms 941 for the current calendar year.

3. Are fringe benefits FUTA-taxable?

Some fringe benefits are exempt from FUTA tax (for example, certain meals and lodging and employer contributions to accident or health plans, including certain employer payments to an HSA), but other fringe benefits—including noncash fringe benefits—must be included in total payments and may be FUTA-taxable.

4. Who files Form 941 for third-party sick pay?

Generally, the employer reports third-party sick pay on Form 941 if it receives timely notice and the third party transfers liability for the employer’s share of employment taxes to the employer; if the third party is the employer’s agent, the employer reports the sick pay unless an agency agreement requires the third party to collect, report, pay, and/or deposit the employment taxes on the sick pay.

5. When is 941 Schedule B required?

Attach Schedule B (Form 941) only if you’re a semiweekly schedule depositor (including if you trigger the $100,000 next-day deposit rule). If you become a semiweekly depositor during the quarter, complete Schedule B for the entire quarter. However, don’t complete Schedule B for a quarter if your total taxes on Form 941, line 12, are under $2,500.

The Bottom Line

Form 940 and Form 941 cover different payroll tax obligations, and when you track the right wage bases, follow the correct deposit schedule, and file on time, you reduce your risk of getting notices or rejections and stay penalty-free.

E-file Forms 940 and 941 faster with built-in checks and clean records—file with Tax1099 today.

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