IRS 940 Explained

What is IRS 940?

IRS 940 is a tax form used by employers to report and pay federal unemployment taxes (FUTA). It is an annual form that summarizes an employer’s FUTA tax liability for the year. Employers, whether small businesses or larger corporations, are required to fill out this form if they meet certain criteria regarding employee wages.

Fill out IRS 940 online

Get the latest version of the form and complete it in minutes.

Get IRS 940

Purpose of IRS 940

The primary purpose of IRS 940 is to ensure that employers contribute to the federal unemployment fund, which provides benefits to unemployed workers. This form helps the IRS track how much tax each employer owes based on their payroll. By filling it out, employers fulfill their legal obligations and contribute to a safety net that assists workers in times of unemployment.

Where is IRS 940 used and by whom?

IRS 940 is primarily used by businesses that have employees and pay them wages. Below are some typical user groups and scenarios:

1.

Small businesses with one or more employees who are subject to federal unemployment taxes.
2.

Corporations that have a large workforce and need to manage their unemployment tax responsibilities annually.
3.

Non-profit organizations that hire employees and thus must contribute to the unemployment insurance system.
4.

Seasonal businesses that may need to report their employment varying throughout the year.

Step-by-step: how to fill out IRS 940

Filling out IRS 940 is a straightforward process. Here’s a step-by-step guide to help you complete the form effectively:

1.

Gather your payroll records from the previous year.
2.

Access the IRS 940 form, which can be found on the IRS website or generated through platforms like pdfFiller.
3.

Complete the identification section, including your business name and EIN (Employer Identification Number).
4.

Report your total wages subject to FUTA in Part 1.
5.

Calculate the tax owed based on the taxable wages and input this in the appropriate section.
6.

Complete the additional questions in Part 2, if applicable, such as if you have any state unemployment tax credits.
7.

Ensure all numbers are accurate, then review the completed form for any potential errors.
8.

Sign and date the form before submission.

You can fill out this form easily using pdfFiller, which allows for seamless editing and signing directly online.

Who is required to complete IRS 940?

Employers must complete IRS 940 if they meet certain criteria, including:

1.

Employing one or more individuals for at least a part of a day in any 20 or more weeks within the current or previous year.
2.

Paying wages of $1,500 or more in any calendar quarter.
3.

Having a business in more than one state.

If your business meets any of these criteria, you are obligated to file IRS 940 each year.

Information you need to complete IRS 940

To fill out IRS 940 accurately, you need the following information:

1.

Your legal business name and address.
2.

Your Employer Identification Number (EIN).
3.

Total wages paid to employees that are subject to FUTA.
4.

Any deductions for state unemployment tax (SUTA) that you can claim.
5.

Details about any credit reduction states, if applicable.
6.

Any adjustments due to prior year underpayments.

How to submit IRS 940

You can submit IRS 940 in several ways:

1.

Online through the IRS e-file system, if you're filing for multiple years.
2.

By mail to the designated IRS address for your state, ensuring proper postage is applied.
3.

You can also use trusted online services like pdfFiller to e-file your form directly.

Be aware of the submission deadline—IRS 940 must typically be filed by January 31 of the following year, although any taxes owed should be deposited quarterly.

When to update or refile IRS 940

You may need to update or refile IRS 940 under the following circumstances:

1.

If there are errors in the original filing that need correction.
2.

Changes in your business’s structure or location after the original submission.
3.

If you hire more employees or pay additional wages that exceed the thresholds.

Keeping your form up to date ensures compliance with IRS requirements.

What happens if you don’t file IRS 940?

Failing to file IRS 940 on time can lead to serious consequences:

1.

Potential penalties from the IRS, which can accrue over time.
2.

Interest on unpaid taxes, increasing your financial liability.
3.

Issues with your business’s credit rating if taxes remain unpaid.
4.

Incompatibility with future unemployment benefits for employees if taxes are not remitted.

It’s crucial to address and file IRS 940 in a timely manner to avoid these negative outcomes.

Fill out IRS 940 online

Get the latest version of the form and complete it in minutes.

Get IRS 940

Frequently Asked Questions About the IRS 940

What is IRS 940 and why is it important for employers?

IRS 940 is the Employer's Annual Federal Unemployment (FUTA) Tax Return form that employers must file. This form provides essential information regarding the taxes owed for employee unemployment benefits. Filing the IRS 940 correctly ensures that employers comply with federal tax regulations and avoids penalties.

Who needs to file IRS 940?

Any business that pays salaries and has employees in the United States must file IRS 940, specifically if those employees are subject to FUTA tax. This includes various types of businesses, such as corporations, partnerships, and sole proprietorships. Ensuring timely submission of the IRS 940 is crucial to meet federal requirements.

When is the due date for filing IRS 940?

The due date for filing IRS 940 is typically January 31 of the following year. However, if employers have timely deposited all required FUTA taxes, they have until February 10 to file. Staying aware of the due dates for IRS 940 helps prevent late fees and ensures compliance with federal tax laws.

What information is needed to complete IRS 940?

To complete IRS 940, employers need detailed information about their employee payroll and unemployment tax deposits throughout the year. Essential details include the total taxable wages paid, the amount of FUTA tax owed, and any credits applicable from state unemployment taxes. Keeping accurate payroll records simplifies the completion of the IRS 940 form.

How do I pay the taxes reported on IRS 940?

Taxes reported on IRS 940 should be paid via electronic funds transfer or by mailing a check with the completed form. Businesses may be required to deposit FUTA taxes quarterly if their liability exceeds a certain threshold. Following payment guidelines ensures that the IRS receives the funds on time, preventing unnecessary penalties.

What happens if I miss the IRS 940 filing deadline?

Missing the IRS 940 filing deadline can result in penalties and interest on the unpaid taxes. Employers may also face additional scrutiny from the IRS, which can lead to audits or other legal repercussions. It's essential for businesses to file the IRS 940 as soon as possible to minimize any financial consequences.

Can I amend my IRS 940 after filing?

Yes, if you discover errors after filing IRS 940, you can amend the form using IRS Form 940-X. This allows you to correct any mistakes regarding wages, taxes owed, or other critical information. Timely amending the IRS 940 ensures that your tax records are accurate and up to date.

Are there any exemptions to filing IRS 940?

Certain small employers, specifically those whose total FUTA tax liability is less than $500 in a calendar year, may be exempt from filing IRS 940 for that year. Additionally, employers who only hire family members may also have exemptions. Understanding these exemptions can save time and effort in filing the IRS 940.

What are common mistakes to avoid when filing IRS 940?

Some common mistakes when filing IRS 940 include incorrect calculation of taxable wages, failure to report state unemployment tax credits, and missing signing the form. These errors can lead to penalties and increase the chances of IRS audits. Double-checking calculations and ensuring completeness can help avoid these mistakes when submitting IRS 940.

Where can I find assistance for completing IRS 940?

Assistance for completing IRS 940 can be found through various resources, including tax preparation services, certified public accountants, and the IRS website itself. Many online tax software solutions also offer guidance for filling out IRS 940. Utilizing these resources ensures that your form is accurately completed and compliant with tax regulations.

Author:

by Iryna Marchuk

Lead Writer/Blogs Manager at airSlate

Disclaimer: This content is for informational purposes only. It is not legal or other professional advice. airSlate provides this material on an "as-is" basis and disclaims all representations, guarantees, or warranties, whether express, implied, or statutory, including but not limited to warranties of merchantability, fitness for a particular purpose, or accuracy.