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Form 940

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FORM 940 — EMPLOYER'S ANNUAL FEDERAL UNEMPLOYMENT (FUTA) TAX RETURN

Employer identification

Employer identification number (EIN):

Social security number (if sole proprietor):

Part 1 — FUTA tax computation

1. Total payments to all employees during the year:

2. Payments excluded from FUTA (describe in Schedule A if required):

3. Taxable FUTA wages (enter amount up to the FUTA wage base):

4. FUTA tax before adjustments (enter rate used): — Amount:

5. Allowable credit for state unemployment taxes (from Schedule A):

6. FUTA tax after adjustments (line 4 minus line 5):

7. Total deposits for this year (including any overpayment applied):

8. Balance due (if line 6 is greater than line 7) or Overpayment (if line 7 is greater than line 6):

Part 2 — Deposit schedule and explanation

Did you deposit FUTA tax when due? Check the statement that applies:

If you did not deposit when required, provide explanation below or attach statement:

Schedule A — State unemployment contributions

List state and amounts of contributions used to claim credit on Form 940. For each state list: State name; Total taxable wages; State unemployment contribution amount; Quarter(s) paid (if required).

Certification

Under penalties of perjury, I declare that I have examined this return and accompanying schedules and statements, and to the best of my knowledge and belief they are true, correct, and complete.

  1. I am authorized to sign for the employer identified on this return.
  2. All amounts reported on this return reflect amounts subject to federal unemployment tax as required by law.
  3. I understand that willful falsification of any information on this return may subject me to civil or criminal penalties under applicable law.

If signed by an agent, enter the agent's relationship to the employer and provide a power of attorney or authorization if required to sign on behalf of the employer.

Print name:

Signature:

Date:

Title:

Daytime phone:

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What Form 940 is and when employers use it

Form 940 is the Internal Revenue Service annual return employers use to report and reconcile federal unemployment tax (FUTA) liabilities for the calendar year. It summarizes taxable FUTA wages, computes the FUTA tax before and after any allowable state unemployment tax credits, and reconciles deposits made during the year. Most employers who pay wages to employees must file Form 940 even when no FUTA is due. The form is separate from quarterly payroll reports (Form 941) and from state unemployment filings and serves as the federal annual reconciliation of FUTA obligations.

Why completing Form 940 correctly matters

Accurate Form 940 filings ensure correct FUTA tax reporting, maintain employer eligibility for state FUTA credit, and avoid IRS penalties and interest. The return reconciles deposits with annual liability so errors can trigger penalty assessments, additional tax, and increased audit risk.

Why completing Form 940 correctly matters

Who prepares and who signs Form 940

Employers and payroll administrators complete Form 940; certified public accountants, payroll firms, or in-house payroll teams often prepare it on behalf of employers.

  • Small business owners who run payroll and meet FUTA thresholds
  • Payroll service providers and accountants filing on clients' behalf
  • Human resources or payroll teams at medium and large employers

The employer or an authorized agent must sign the form; accurate preparation requires payroll records and information about state unemployment tax payments to determine credits and net FUTA liability.

Core parts of a professional Form 940 return

Form 940 follows a fixed structure. Below are the primary sections you will complete and what each section accomplishes when reconciling FUTA tax for the year.

Employer information

Enter EIN, business name, address, and reporting year so the IRS can match the return to employer tax records and deposits.

Taxable wages

Report total payments subject to FUTA — generally the first $7,000 paid to each employee during the year before exclusions or adjustments.

FUTA tax computation

Calculate gross FUTA at the statutory rate and apply allowable state unemployment tax credits to determine net FUTA tax due.

Deposit reconciliation

List total FUTA deposits made during the year and reconcile them against the computed annual liability to identify any balance due or overpayment.

Credit reduction items

Disclose any reductions in the state unemployment credit (for states with outstanding federal loans) that increase the employer's net FUTA rate.

Signature block

An authorized officer or agent must sign and date the form; preparer information and PTIN are entered if a paid preparer completed the return.

Step-by-step: completing Form 940

Follow this sequence when assembling payroll data and completing the return to ensure the form reconciles correctly with your deposits.

  • 01
    Gather payroll records: Collect W-2 totals, payroll registers, and state UI tax payments for the calendar year.
  • 02
    Calculate taxable wages: Determine each employee's wages subject to FUTA, capped at the statutory wage base per employee.
  • 03
    Compute FUTA and credits: Apply the FUTA rate, then subtract allowable state UI credits to reach net FUTA tax.
  • 04
    Reconcile and sign: Compare deposits to liability, correct discrepancies, sign the form, and file by the required deadline.

Configuring an online Form 940 workflow

Set these common workflow settings when building an e-file or e-sign workflow for Form 940 to preserve accuracy and auditability.

Field Configuration
EIN field Required, numeric validation, mask format
Wage totals Calculated fields, sum validation
Deposit attachments Optional PDF uploads, required for disputes
Signer authentication Email + access code or stronger MFA

Where to file Form 940 and how it moves through processing

Form 940 is submitted to the IRS annually; deposits and state filings follow separate channels. Choose a filing route that maintains records of submission and receipts.

  • E-file with IRS: Use approved e-file providers to submit electronically and receive an acknowledgment.
  • Paper filing: Mail the completed form to the IRS address for your area if not e-filing; retain proof of mailing.
  • Payroll provider: Licensed payroll services can prepare, deposit, and file on your behalf with records.
  • State unemployment filing: File state UI returns separately with your state unemployment agency; these affect FUTA credit eligibility.

Options for sharing, signing, and submitting Form 940 electronically

Modern workflows combine e-signature, secure document storage, and authenticated submission to maintain compliance and audit trails.

  • PDF and DOCX support: Upload and export common formats
  • Authentication methods: Email, SMS, or stronger MFA
  • Audit trail: IP, timestamp, and action log

Ensure your chosen platform supports secure transport, tamper-evident storage, and the authentication level your organization needs for tax and payroll documents.

Key dates and deposit timing for Form 940

Observing filing and deposit rules reduces penalties. Here are the regular timing requirements employers should track when preparing Form 940.

Annual return due date:

January 31 for the prior calendar year, unless adjusted by IRS rules

Deposit threshold:

Deposit FUTA tax during the year if liability exceeds $500 in a quarter

Deposit schedule:

Quarterly deposits when threshold exceeded; otherwise pay with Form 940

Extensions:

Contact IRS or check Form 940 instructions for limited adjustment options

Record retention:

Keep payroll and deposit records to support filings for required periods

Common mistakes to avoid when preparing Form 940

  • Using incorrect EIN or business name causing misapplied payments
  • Misreporting taxable wages or failing to apply wage caps properly
  • Failing to reconcile deposits with computed annual liability
  • Overlooking state credit reductions that increase FUTA liability

Penalties and risks tied to incorrect Form 940 filings

Late filing penalties: May mirror IRC §6721 assessment
Late deposit penalties: Penalty and interest on unpaid FUTA
Credit errors: Loss of state UI credit increases tax due
Intentional disregard: Higher penalties under IRC §6721
Recordkeeping failures: Compromises audit defense
Backup withholding triggers: 24% withholding for incorrect TINs

How Form 940 compares with related payroll filings

Form 940 serves a specific annual reconciliation role; compare it to Form 941 and state unemployment returns to understand overlaps and differences.

Criteria Form 940 Form 941
Filing frequency annual quarterly
Main tax reported futa income tax & fica
Deposit timing annual reconciliation quarterly or monthly deposits
State interaction yes (credit) primarily federal payroll

eSignature vendor pricing when handling Form 940 workflows

Compare per-user pricing, trial availability, bulk send, audit trail, HIPAA support, and envelope limits for common eSignature vendors used to collect signatures and manage tax workflows.

signNow DocuSign Adobe Sign PandaDoc HelloSign
Starting Price $8/user/mo $15/user/mo $14/user/mo $19/user/mo $15/user/mo
Free Trial Yes, 7-day Varies by plan Varies by plan Varies by plan Varies by plan
Bulk Send Yes Yes Yes Yes No
Audit Trail Yes Yes Yes Yes Yes
HIPAA Compliant Yes Yes Yes No No

Security and compliance details relevant to electronic Form 940 workflows

Transport encryption: TLS 1.2/1.3 in transit
Data at rest: AES-256 encrypted storage
Audit logging: Detailed signer and action audit trails
Regulatory standards: ISO 27001 and SOC 2 Type II
eSignature law: Compliant with ESIGN and UETA
Healthcare BAA: HIPAA covered with BAA

Frequently asked questions about Form 940

Answers to common questions employers have when preparing, submitting, and reconciling Form 940 with payroll and state filings.


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