Payroll – Details on the IRS Form 940

Payroll & Time

Introduction

Form 940 Filing Requirements: Employers who were not household employers or agricultural employers must file Form 940 if they paid a combined total of $1,500 or more in wages to all of their employees in any calendar quarter; or had one or more employees for some part of a day in any 20 different weeks during the year. Count all regular, temporary, and part-time employees. A partnership should not count its partners as employees. Note: Agricultural employers must file Form 940 if they paid a combined total of $20,000 or more to farm workers during any calendar quarter; or had 10 or more farm workers during some part of a day for at least 1 day during any 20 different weeks during the year. Note: Household employers use Schedule H of Form 1040 instead of Form 940 to report and pay FUTA taxes for their household employees.

Form 940 Filing Deadline

Form 940 is due by January 31, of the following calendar year.

Form 940 Extensions

If all tax is deposited when due, deadline is extended 10 days. There is no additional extension for filing Form 940.

Form 940 Penalties

Form 940 late filing penalty of 5% of tax per month up to 25%.

Form 940 late payment penalty of 0.5% of tax per month up to 25%.

Form 940 FUTA Tax Rate

6.2% of each employee’s first $7,000 of wages.

Certified State Unemployment Fund

If the employer pays into a certified state unemployment fund by the due date of Form 940, the employer may receive a credit of up to 5.4% of the total taxable Form 940 FUTA wages.

Form 940 Tax Deposit Requirements

The Form 940 FUTA deposit is due by the following dates.

March 31                     –           April 30

June 30                       –           July 31

September 30              –           October 31

December 31               –           January 31

Additional information

Current FUTA rate and deposit threshold

The FUTA tax rate is 6.0% of the first $7,000 of each employee's wages. Employers that pay state unemployment tax on time can take a credit of up to 5.4%, so the net FUTA rate is usually 0.6% (it can be higher in credit-reduction states).

A deposit is required once your accumulated FUTA liability is more than $500. If it is $500 or less at the end of a quarter, carry it forward to the next quarter.