What IRS Form 940 (2017) Is For

IRS Form 940 (2017) is the Employer's Annual Federal Unemployment (FUTA) Tax Return that reports your annual Federal Unemployment Tax Act liability for the 2017 tax year (IRS Instructions for Form 940 (2017)). You must file Form 940 if you paid wages of $1,500 or more in any calendar quarter during 2016 or 2017, or had one or more employees for at least part of a day in 20 or more different weeks during either year. The FUTA tax funds unemployment compensation programs and applies to the first $7,000 paid to each employee during 2017 (IRS Instructions for Form 940 (2017)).

When You'd Use Form 940 for 2017 (Late or Amended Filing)

You would file Form 940 for 2017 as a late return if you never filed the original return that was due January 31, 2018 (or February 12, 2018 if all FUTA taxes were deposited timely). Common scenarios include receiving IRS notices for unfiled returns, balance due notices, or during business acquisition reviews. You'd file an amended Form 940 for 2017 to correct errors on a previously filed return, such as claiming state unemployment tax credits paid after the original due date, correcting wage calculations, or addressing credit reduction state issues. The statute of limitations for claiming refunds is generally three years from the filing date or two years from payment date, whichever is later, making 2017 refund claims time-sensitive in most cases (Time you can claim a credit or refund, IRS.gov).

Key Rules Specific to 2017

For tax year 2017, California and the U.S. Virgin Islands were credit reduction states, requiring employers who paid wages subject to unemployment laws in these jurisdictions to complete Schedule A (Form 940) and pay additional FUTA tax at a 2.1% credit reduction rate (Federal Register Notice, December 1, 2017). The FUTA tax rate was 6.0% on the first $7,000 of wages paid to each employee, with a maximum credit of 5.4% for timely state unemployment tax payments, resulting in a net rate of 0.6% for most employers (IRS Instructions for Form 940 (2017)). Electronic deposit requirements were mandatory using the Electronic Federal Tax Payment System (EFTPS), with deposits due by 8 p.m. Eastern Time the day before the due date.

Step-by-Step (High Level)

• Gather tax transcripts and records: Obtain wage records, state unemployment tax payments, and any prior correspondence from the IRS regarding your 2017 FUTA obligations
  
  
• Complete the correct-year form: Use the 2017 version of Form 940, checking the "amended return" box if correcting a previously filed return, and include all wages paid during 2017 regardless of when you're filing
  
  
• Attach required schedules: Complete Schedule A (Form 940) if you paid wages in California or U.S. Virgin Islands, and Schedule R if filing as an aggregate filer
  
  
• Submit using proper procedures: Mail amended returns to the "Without a payment" address even if including payment, or file late returns electronically through approved e-file providers
  
  
• Keep comprehensive copies: Maintain copies of the filed return, all attachments, payment confirmations, and mailing receipts for your records
  
  

Common Mistakes and How to Avoid Them

• Wage base calculation errors: Remember the $7,000 annual wage base limit applies per employee for the entire calendar year, not per quarter - track cumulative wages carefully to avoid over-calculating FUTA tax
  
  
• Missing credit reduction calculations: If you paid wages in California or U.S. Virgin Islands during 2017, you must complete Schedule A (Form 940) and pay the additional 2.1% credit reduction amount - failure to do so will result in underpayment penalties
  
  
• Incorrect state unemployment tax timing: You only receive the 5.4% state credit for unemployment taxes actually paid by your Form 940 due date (January 31, 2018, or February 12, 2018) - late state payments require amended returns to claim credits
  
  
• Using wrong form version: Always use the 2017 Form 940 for any 2017 corrections or late filings - using current year forms for prior years will cause processing delays and potential rejection
  
  
• Deposit vs. payment confusion: If your annual FUTA tax exceeds $500, you should have made quarterly deposits; don't try to pay the entire annual amount with a late-filed return without consulting deposit requirements
  
  
• Successor employer complications: If you acquired a business during 2017, carefully distinguish between wages you paid versus wages paid by the predecessor, and only report wages for periods you were the employer unless specific successor rules apply
  
  

What Happens After You File

The IRS typically processes Form 940 returns within 6-8 weeks, though amended returns may take 8-12 weeks for processing (Correcting employment taxes, IRS.gov). You'll receive acknowledgment of electronic filings immediately, while paper returns generate processing notices once entered into IRS systems. If you've underpaid, you'll receive a balance due notice with penalty and interest calculations - you can request an online payment agreement (Form 9465) if you cannot pay in full. The IRS may assess late filing penalties of 5% per month (up to 25% maximum) on unpaid taxes, plus late payment penalties of 0.5% per month, and interest that compounds daily (Failure to file penalty, IRS.gov). If you disagree with any penalties or interest, you have appeal rights and can request penalty abatement for reasonable cause by responding to IRS notices with explanations.

FAQs

Can I still file Form 940 for 2017 even though it's years late?

Yes, you can file late returns, but you cannot claim refunds if more than three years have passed since the original due date (generally April 2021 for 2017 returns). You'll face penalties and interest on any taxes owed.

What penalties will I face for filing Form 940 for 2017 late?

The IRS assesses late filing penalties of 5% of unpaid taxes per month (maximum 25%), late payment penalties of 0.5% per month (maximum 25%), plus daily compounding interest from the original due date until paid in full (IRS.gov penalty information).

Do I need tax transcripts before filing a late 2017 Form 940?

While not required, obtaining wage and income transcripts from IRS.gov helps ensure accuracy and shows any prior filings or IRS actions on your account. This is especially important for amended returns.

How do I know if I was affected by 2017 credit reduction states?

If you paid wages to employees working in California or U.S. Virgin Islands during 2017, you must complete Schedule A (Form 940) and pay an additional 2.1% FUTA tax on those wages - check your payroll records for employee work locations.

Should I also amend my state unemployment returns when filing an amended Form 940?

Generally yes, if the federal changes affect state unemployment tax calculations. Contact your state unemployment agency as each state has different procedures and deadlines for correcting unemployment tax filings.

What's the difference between late filing and amended filing for Form 940?

Late filing means you never filed the original 2017 return - leave the amended box unchecked. Amended filing means you're correcting a previously filed 2017 return - check the amended return box and include explanations for changes.

Can I get a refund from overpaid 2017 FUTA taxes?

Refund claims for 2017 are likely barred by the statute of limitations unless filed within three years of the original due date or two years of payment date. However, you may be able to apply overpayments to other tax liabilities or future periods in certain circumstances (IRS refund statute guidelines).

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