{"id":463,"date":"2020-10-06T08:43:34","date_gmt":"2020-10-06T08:43:34","guid":{"rendered":"https:\/\/www.tax1099.com\/blog\/?p=463"},"modified":"2025-10-24T10:20:54","modified_gmt":"2025-10-24T10:20:54","slug":"what-is-form-940","status":"publish","type":"post","link":"https:\/\/www.tax1099.com\/blog\/what-is-form-940\/","title":{"rendered":"What Is Form 940?"},"content":{"rendered":"

Running a business is more than managing <\/span>payroll. Employers <\/span>ar<\/span>e responsible for<\/span> f<\/span>iling<\/span> various tax<\/span> forms<\/span> that fund social <\/span>programs,<\/span> a<\/span>nd Form 940 is one such form.<\/span><\/span><\/p>\n

Federal Unemployment Tax Act, otherwise known as FUTA, is a payroll tax that employers need to pay. This is done to fund unemployment benefits for people who lost their jobs. The IRS requires all employers to report the FUTA tax they owe using Form 940.<\/p>\n

Is it mandatory to fill out Form 940? Who must file Form 940? In this blog, we will look at Form 940, who needs to file it, and how to report FUTA tax wages.<\/p>\n

What Is Form 940?<\/h2>\n

Form 940<\/strong> or Employer’s Annual Federal Unemployment (FUTA) Tax Return<\/strong> is an annual tax return filed by employers to report if they are meeting FUTA requirements.<\/p>\n

When filing form 940, there are two other important documents you must keep in mind- Schedule A and Schedule R. Schedule R is used when one Form 940 covers multiple businesses. It splits up FUTA tax, wages, credits, deposits, and payments among the businesses.<\/p>\n

On the other hand, Schedule A, is used only if the employer is in a \u201ccredit reduction state\u201d or owes money to FUTA. It calculates the extra FUTA tax, you, the employer must pay.<\/p>\n

Why Do You Need To File Form 940?<\/h2>\n

Employers need to file form 940 FUTA tax reporting to help fund unemployment benefits. It is used to verify whether or not you have paid FUTA and state unemployment tax. It also makes sure you did not deduct any amount from your employees’ wages.<\/p>\n

The IRS uses this form to cross-check and verify FUTA tax totals against EFTPS deposits to reconcile FUTA credits with state unemployment filings.<\/p>\n

By paying state unemployment taxes on time, you can claim FUTA credit of up to 5.4%, which would reduce the FUTA rate to 0.6%.<\/p>\n

Who Must File Form 940 & Threshold Tests?<\/h2>\n

To understand who must file Form 940, you must check if your business can pass the following tests:<\/p>\n