IRS Form 940 is the form employers use to report and pay Federal Unemployment Tax (FUTA), which funds unemployment benefits for workers who lose their jobs. The tax is only paid by employers, and employees do not have to contribute to FUTA. The form is filed annually and covers wages paid to employees during the tax year.
The FUTA tax rate is based on the first $7,000 of wages paid to each employee, and employers may be eligible for a credit if they pay state unemployment taxes. Employers are required to file Form 940 if they:
- Paid $1,500 or more in wages to employees in any calendar quarter.
- Employed one or more employees for at least part of a day in 20 or more different weeks in the current or previous year.
Form 940 must be filed by January 31 of each year, and employers who owe FUTA tax of more than $500 are required to make quarterly payments. Filing Form 940 accurately is essential to avoid penalties and ensure compliance with federal employment tax regulations.