Is Form 940 the same as Form 941?

No. Form 940 is the annual return for federal unemployment tax only. Form 941 is the quarterly return for withheld income tax and Social Security and Medicare tax, and it never reports unemployment tax. FUTA deposits are quarterly, while Form 941 deposits generally follow a separate monthly or semiweekly schedule.

Do you file Form 940 after closing your business?

Yes, for the final year. You check box d to mark a final return, complete the lines that apply, and sign it. You also attach a statement naming the person who keeps the payroll records and the address where they will be kept.

Does a household employer file Form 940?

It depends. A household employer owes FUTA tax once cash wages reach $1,000 in a quarter of this year or last. It generally reports that tax on Schedule H (Form 1040). If you also have other employees, you can choose to include household employees on Form 940 instead. You must then also file Form 941, 943, or 944.

TAXES

Form 940

Form 940 is the IRS annual return reporting the federal unemployment (FUTA) tax you owe on the first $7,000 a year of each employee’s wages.

Updated Sep 20264 min read4 primary sources

FORM: Employer’s Annual Federal Unemployment (FUTA) Tax Return
WHO FILES: $1,500 in a quarter, or 20 weeks with employees
NO FORM?: Household employers generally use Schedule H instead
WATCH FOR: Late state unemployment payments shrinking your 5.4% credit

Next due dates

Monday, February 1, 2027: Form 940 annual FUTA return

Moved to the next business day when the date falls on a weekend or bank holiday. See the full compliance calendar

FUTA tax is yours alone: none of it comes out of an employee’s pay. The rate is 6.0%, and paying state unemployment tax in full and on time earns a credit of up to 5.4%. That brings the effective rate down to 0.6% outside credit reduction states. You file once a year, even though deposits can fall due each quarter. The return reconciles the credit against the state unemployment tax you actually paid.

Who must file Form 940?

FUTA tax applies when any test below is met in the current or prior calendar year. Household employers usually report it on Schedule H, not Form 940. Count full-time, part-time, and temporary employees, but not a partnership’s partners. Section 501(c)(3) organizations are generally not subject to FUTA tax, and state and local government employers file no Form 940.

EMPLOYER	WAGES PAID IN ANY CALENDAR QUARTER	EMPLOYEE TEST
Most employers	At least $1,500 in a quarter	One employee for part of a day in 20 or more weeks
Household employers	At least $1,000 in a quarter, in cash wages	No weeks test
Agricultural employers	At least $20,000 in a quarter, in cash wages	10 or more farmworkers in 20 or more weeks

How does Form 940 figure the tax?

A state that has not repaid its federal unemployment loans becomes a credit reduction state. Wages subject to its law earn a smaller credit, figured on Schedule A (Form 940). You also file Schedule A when you paid state unemployment tax in more than one state.

=Total payments to all employeesfor the calendar year (line 3)
−Payments exempt from FUTA taxsuch as health plan contributions, group-term life insurance, and employer contributions to a qualified plan (line 4)
−Pay above $7,000 a yearfor each employee (line 5)
=Total taxable FUTA wagestaxed at 6.0%, less the state credit of up to 5.4% (line 7)

Work it out: Form 940, lines 3 to 12

Enter each employee’s pay for the year and the part exempt from FUTA tax, then your state’s taxable wages, experience rate, and the state tax you paid before and after the Form 940 due date. The card fills in lines 3 to 12, with the line 10 worksheet for the credit.

WORKED EXAMPLE

One year, three employees: the state tax paid after the Form 940 due date

26 U.S.C. §3302

Pay for the yearFUTA taxes the first $7,000 of each employee’s pay after exempt payments

Employee APay$Exempt$

Taxable FUTA wages: $7,000.00

Employee BPay$Exempt$

Taxable FUTA wages: $7,000.00

Employee CPay$Exempt$

Taxable FUTA wages: $7,000.00

Exempt paymentsTaxable, up to $7,000Above $7,000, not taxedThe $7,000 cut-off

Taxable state wagesThe wages your state unemployment tax applied to

State experience rateThe rate your state assigned you

State tax paid on timePaid by the Form 940 due date: full credit

State tax paid latePaid after the Form 940 due date: 90% of the credit

Taxable FUTA wages$21,000.00Form 940, line 7

State credit$1,085.40Of up to $1,134.00 (5.4%)

FUTA tax for the year$174.60Form 940, line 12 (2025 form)

All state tax paid by the Form 940 due date$126.00

As entered$174.60

Paying $648.00 of state tax late adds $48.60 of FUTA taxState tax paid after the Form 940 due date earns only 90% of the credit. Paid on time, the year’s FUTA tax would be $126.00.

$48.60more for the year

FUTA tax for one calendar year, one state, and up to three employees, following Form 940 lines 3 to 12 and the line 10 worksheet of the 2025 instructions: 6.0% of each employee’s pay up to the wage base after exempt payments, less a state credit of up to 5.4%, with state tax paid after the Form 940 due date earning 90% of its credit. It leaves out credit reduction states and employers in more than one state (Schedule A), the tests for who owes FUTA, including household and agricultural employers, 501(c)(3) organizations, and state and local government employers, and quarterly deposits. Other cases and state law can change the result.

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When are the return and deposits due?

Deposits go by electronic funds transfer. FUTA tax of $500 or less in a quarter carries over to the next quarter until the total tops $500.

January 31Form 940 is due for the prior calendar year, or the next business day after a weekend or legal holiday.
February 10The filing date instead, when you deposited all FUTA tax when it was due.
Last day of the next monthDeposit due once undeposited FUTA tax tops $500 at a quarter’s end.
Penalty deadline: Form 940 due dateState unemployment tax paid after it can shrink your credit and raise your FUTA tax.

Frequently asked

It depends on the amount. Fourth-quarter FUTA tax of $500 or less, counting undeposited tax from earlier quarters, can be deposited or paid with the return. Above $500, you deposit the entire amount by the Form 940 due date. Earlier quarters follow the same $500 carryover rule.

SOURCES

General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.

Form 940

Next due dates

Who must file Form 940?

How does Form 940 figure the tax?

Work it out: Form 940, lines 3 to 12

When are the return and deposits due?

Frequently asked

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Form 940

Next due dates

Who must file Form 940?

How does Form 940 figure the tax?

Work it out: Form 940, lines 3 to 12

When are the return and deposits due?

Frequently asked

Can you pay FUTA tax with Form 940?

Is Form 940 the same as Form 941?

Do you file Form 940 after closing your business?

Does a household employer file Form 940?

RELATED TERMS

Your next payroll could be your first one on Worklio.