940 vs 941: What’s The Difference Between Them & When to Use FUTA 940 And 941 Quarterly Tax Forms

When you manage a business with employees, navigating and fulfilling various tax requirements is particularly essential. Two important tax forms to understand for reporting employee wages and deposited taxes with the IRS are Form 941 and Form 940. To help you identify the distinctions between both forms, this guide covers the differences between Forms 941 and 940, examining their purposes, distinct filing criteria, and deadlines.

Tax1099, IRS Authorized e-File Service Provider offering Form 941 e-Filing easy and secure way.

What is Form 940?

The 940 Form is an IRS annual tax return used by employers to pay and report FUTA taxes. The Federal Unemployment Tax Act (FUTA) is a federal law that funds support for individuals actively seeking employment but are currently unemployed.

FUTA taxes only apply to the first $7,000 of each employee’s wages in a calendar year. This means that if an employee earns $10,000 in a year, you will only need to calculate the FUTA tax on the first $7,000. Any wages beyond this threshold are FUTA-exempt.

It’s important to note that certain payments are excluded from the calculation of the $7,000 wage threshold. This typically includes payments made under state unemployment compensation laws and any payments made to a retirement plan on behalf of an employee. These exclusions reduce the overall FUTA tax liability for employers.

What is Form 941?

941 Form is also called the Employer’s Quarterly Tax Form, used by employers to report the Federal income tax withheld, social security tax, and Medicare tax (FICA taxes) for the employee’s paycheck. This form is also used to calculate the employer’s share of Social Security and Medicare taxes.

Employers that pay wages that are subject to withholding must file Form 941 every quarter.

Key Difference between 940 and 941

The key differences between Form 940 and Form 941 are their purpose, filing frequency, and the employment taxes they pertain to:

Feature	Form 940	Form 941
Purpose	Employer’s Annual Federal Unemployment Tax Return	Employer’s Quarterly Federal Tax Return
Filing Frequency	Annually	Quarterly
Reporting Period	Calendar Year	Calendar Quarter
Who Files	Employers who paid wages to employees and are subject to FUTA	Employers who withhold federal income tax and FICA from wages
Content	Reports unemployment taxes paid by the employer during the year	Reports income tax withheld and both employer and employee FICA taxes
Filing Deadline	Jan 31 (Feb 10 if all FUTA taxes are paid on time)	Last day of the month after quarter end (e.g., Jan 31 for Q4)
Late Filing Penalty	5% per month, up to 25% of unpaid tax	5% per month, up to 25% of unpaid tax

Purpose

Form 940

This form serves the purpose of reporting and settling the federal unemployment tax (FUTA) liability. The funds collected contribute to supporting unemployment benefits. Employers use Form 940 to compute and declare yearly FUTA tax liability.

Form 941

Form 941 is used to report and pay federal income tax withholding, Social Security, and Medicare tax—collectively referred to as payroll taxes.

Frequency of Filing

Form 940

Form 940 is filed annually, due January 31st of the following year (or February 10th if FUTA is fully paid on time).

Form 941

Form 941 is filed quarterly—due the last day of the month following each calendar quarter (e.g., May 1, July 31, October 31, and January 31).

Taxes Reported

Form 940

Form 940 covers FUTA taxes only, which are not deducted from employees’ wages. Employers pay these taxes directly.

Form 941

Form 941 reports payroll taxes including federal income tax, Social Security, and Medicare taxes withheld and matched by employers.

Electronically filed 941 and 940 forms are directly transmitted to the IRS from Tax1099.

After filing Form 941 or 940 via Tax1099, you’ll receive an email update the same day on the status.

Note: IRS does not accept Form 941X electronically—it must be printed and mailed.