If you’re working with a tax software or professional, you can also choose to make your payments via Electronic Funds Withdrawal (or EFW). With this option, you can both e-file and authorize payment in one step. To pay your full FUTA tax balance or make quarterly deposits online, you’ll use the Electronic Federal Tax Payment System (or EFTPS).
- Enter the amount of your FUTA tax liability for each quarter on Lines 16a–d.
- Although we do not cover these schedules here, we can take a closer look at when you might need to file each one.
- Only report a payment as exempt from FUTA tax liability if you included the payment on Line 3.
- If your business was sold or transferred during the year, each employer who answered “Yes” to at least one question above must file Form 940.
- The IRS outlines clear guidelines that determine whether you’re on the hook for these responsibilities based on the wages you’ve paid and the number of employees you have.
- Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law.
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FUTA together with state unemployment systems fund payments for unemployed workers. This guide covers who has to file Form 940, when it’s due, and how to accurately complete each line. Currently, the FUTA tax rate is 6.0% and applies to the first $7,000 you paid to each employee as wages during the year. The $7,000 is often referred to as the federal or FUTA wage base. A credit reduction state is one that took loans from the federal government to meet its state unemployment tax liabilities but has not repaid the loans in time.
- Most businesses are required to pay the federal unemployment tax (FUTA) on employee wages, which is reported using Form 940.
- Under penalties of perjury, sign and date the form in Part 7.
- The information provided on this website does not, and is not intended to, constitute legal, tax or accounting advice or recommendations.
- IRS Form 940 reports your federal unemployment tax liabilities for all employees in one document.
- Businesses can enjoy the benefits of filing and paying their federal taxes electronically.
- At that point, you must deposit your tax for the quarter.
IRS Form 8379 Instructions
Any business that owes more than $500 in FUTA taxes should use the Electronic Federal Tax Payment System to submit quarterly payments by the end of April, July, October, and January. And keep tabs on those payments to make sure everything adds up at the end of the year. If you are a multi-state employer or receive the FUTA tax credit reduction (aka check Lines 1b and/or 2), complete Schedule A (Form 940), Multi-state Employer and Credit Reduction Information. Use Schedule A (Form 940) to figure your annual Federal Unemployment Tax Act (FUTA) tax for states that have a credit reduction on wages that are subject to the unemployment compensation laws. Generally, tax returns and return information are confidential, as required by section 6103.
How Must You Deposit Your FUTA Tax?
Sole proprietors without employees typically do not need to submit Form 940. Nevertheless, if a sole proprietor employs individuals who fulfill the listed criteria, they may be required to submit this form. The due date for filing Form 940 is January 31 of the year following the previous tax year. For example, the due date for filing IRS Form 940 for tax year 2023 was January 31, 2024. However, for taxpayers who deposited all of the outstanding FUTA tax on or before the due date, the deadline was February 12, 2024. However, the tribe must have participated in the state unemployment system for the full tax year and be in compliance with applicable state unemployment law.
Your payment will be processed by a payment processor who will charge a processing fee. Don’t use a credit or debit card to pay taxes that are required to be deposited (see When Must You Deposit Your FUTA Tax, later). For more information on paying your taxes with a credit or debit card, go to IRS.gov/PayByCard. This list of providers offers options based on the relevant tax year. You may have to pay a fee to electronically file the returns.
Navigating the complexities of IRS Form 940 can be daunting, but it’s essential for employers to meet their Federal Unemployment Tax Act (FUTA) obligations. However, a tax-exempt organization is subject to FUTA tax when paying wages to employees on behalf of a non-Section 501(c)(3) organization. If a credit reduction rate applies and you completed Schedule A (Form 940), then enter the total credit reduction here.
Get the Checklist
Part 6 of the form allows you to choose who may speak with the IRS regarding your Form 940 tax return. If you select ‘Yes,’ enter the designated contact’s form 940 instructions name and phone number. Then, enter a five-digit personal identification number (PIN) the contact can use when speaking to the IRS to confirm their authority. Form 940 may also be signed by a duly authorized agent of the taxpayer if a valid power of attorney or reporting agent authorization (Form 8655) has been filed. Complete Schedule A (Form 940) only if you’re a multi-state employer.
Do I need to file 940 Schedule A?
To file Form 940 (or any other IRS form) online, you’ll need to either use tax software or work with an authorized e-file tax professional. The IRS provides a list of their approved software and a database of authorized e-file providers for you to choose from. Form 940 is only required for businesses that have employees, not independent contractors.
However, credit reduction states do not receive the full FUTA tax credit of 5.4%. Though a 940 is filed annually, employers are responsible for depositing taxes owed on a quarterly basis, with all deposits made using electronic funds transfer (EFT). If your business is new and you haven’t filed your first 940 yet, the IRS will automatically enroll you when you apply for your EIN. Don’t forget, most employers are also required to pay state unemployment tax (SUTA).
