Purpose: Form 940 is the annual federal unemployment tax return (FUTA) for employers.
Preparation:
Download Form 940 and its instructions from the IRS website.
Gather your Employer Identification Number (EIN), business legal name, trade name (if applicable), and address.
Key Sections:
Part 1: Indicate if you paid state unemployment tax in one or multiple states. If multiple, complete Schedule A.
Schedule A lists states subject to credit reduction (e.g., California, Vermont).
Part 2: Report total wages paid, exempt payments, and wages over $7,000 per employee.
Calculate taxable FUTA wages and apply the 0.6% rate (assuming full credit).
Adjustments:
If wages were excluded from state unemployment tax or paid late, complete worksheets and adjust lines 9–11.
Credit reduction amounts from Schedule A go on line 11.
Part 4: Compute total tax after adjustments (line 12).
Part 5: Report quarterly FUTA liability (not deposits).
Part 6 & 7: Provide contact info and sign the form.
Payments & Filing:
If balance due exists, pay via EFTPS or include a check with the voucher.
Mailing address depends on whether payment is included.
Special Cases:
Zero tax return: Check box C, complete business info, sign, and mail without payment.
Deadline: January 31, 2026 (next business day if weekend/holiday).
Tips:
Track deposits and liabilities.
Understand nuances for sole proprietors, LLCs, and officers exempt from state unemployment tax.
Resources: IRS instructions and worksheets for adjustments; EFTPS for payments.
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