What Form 940 (2022) Is For
IRS Form 940 (2022) reports an employer’s annual FUTA tax responsibility to the IRS. The Federal Unemployment Tax Act requires employers to pay this federal tax to support unemployment benefits administered by state agencies. Businesses that pay employees wages are subject to FUTA tax unless specifically exempt. The form summarizes total salaries paid, taxable wages, and any state unemployment tax credits that reduce the federal liability. Employers operating in multiple states or in states with credit reduction must also complete Schedule A with Form 940.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions for IRS Form 940 (2022): Employer’s Annual FUTA Return, see our comprehensive guide.
When You’d Use Form 940 (2022)
Employers use Form 940 to report FUTA tax for the 2022 calendar year. It should have been filed by January 31, 2023, or by February 10 if all FUTA deposits were made on time. Those who missed the deadline must still file, even if no tax is owed.
Businesses may also file an amended 2022 Form 940 if they discover errors after submitting their original return. Common reasons include correcting wages paid, updating tax credits, or adjusting payments reported to a state agency. Employers generally have three years from the original due date to amend or claim a refund for overpayment.
Key Rules or Details for 2022
For the 2022 tax year, the FUTA tax rate was 6.0 percent on the first $7,000 of wages per employee. Most employers received a 5.4 percent credit for timely state unemployment tax payments, resulting in a net rate of 0.6 percent. Credit reduction is applied to California, Connecticut, Illinois, New York, and the U.S. Virgin Islands, requiring an additional FUTA tax to be calculated using Schedule A. The Tax Cuts and Jobs Act also kept moving expenses and bicycle commuting reimbursements subject to FUTA tax for that year.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide to Payroll & Employment Tax Forms.
Step-by-Step (High Level)
Employers should follow these steps to file Form 940 accurately and remain compliant with federal unemployment tax requirements:
- Employers should gather all payroll records, including proof of state unemployment tax payments and any prior-year tax information.
- They should verify the total wages paid to each employee during the 2022 calendar year to ensure accurate reporting.
- Employers must calculate the taxable portion of wages up to the first $7,000 paid per employee under the Federal Unemployment Tax Act.
- Each business should determine whether it operates in a credit-reduction state and adjust its calculations accordingly.
- Employers operating in multiple states are required to complete Schedule A to allocate wages and determine their correct FUTA liability.
- The total FUTA tax should be calculated after applying all eligible state unemployment tax credits to reduce the federal tax owed.
- The employer should file Form 940 either by mail or electronically using the correct 2022 version provided by the IRS.
- Employers must keep copies of the completed form, payment confirmations, and all supporting records for future reference or verification.
Accurate recordkeeping, organized documentation, and timely filing help businesses avoid IRS notices, IRS penalties, and unnecessary interest charges.
Common Mistakes and How to Avoid Them
Employers frequently make errors that delay processing or result in additional tax owed. These issues can lead to penalties, delayed refunds, or unnecessary IRS notices. Reviewing the following common mistakes helps ensure accurate filing and compliance:
- Using an outdated or incorrect form year: Employers often file the wrong version of Form 940, which can cause processing delays or rejections. Always confirm the correct year before filing.
- Reporting wages above the $7,000 per-employee limit: Some businesses mistakenly include wages that exceed the FUTA wage base, leading to an overstated tax liability. Employers should only report the first $7,000 of each employee’s annual wages.
- Failing to apply the correct state credit reduction: Filers in credit reduction states must ensure the correct adjustment is applied. Ignoring this step may result in underpayment or additional liability.
- Omitting Schedule A for multi-state operations: Employers operating in multiple states must attach Schedule A (Form 940) to allocate wages accurately. Missing this form can lead to errors in wage reporting and credit calculations.
- Entering an incorrect Employer Identification Number (EIN) or business name: Errors in identifying information can delay processing or misapply payments. Employers should verify that their EIN and business name match IRS records exactly.
- Neglecting to check the amended return box: When submitting corrections to a previously filed Form 940, filers must mark the amended return box. Failing to do so may prevent the IRS from processing the update correctly.
Carefully reviewing all entries before submission helps employers avoid these errors, maintain compliance, and reduce the risk of IRS correspondence or adjustments to their account balance.
What Happens After You File
After receiving Form 940, the IRS reviews it and applies payments to the employer’s FUTA tax account. Paper filings typically take six to eight weeks, while electronic submissions are processed faster. If additional tax is owed, the IRS issues a notice and allows payment plan requests using Form 9465. Employers should retain copies of the form, payment confirmations, and records for a minimum of four years.
Frequently Asked Questions
Who must file IRS Form 940 (2022)?
Employers must file IRS Form 940 (2022) if they paid wages of $1,500 or more in any calendar quarter or had employees for at least part of a day in 20 or more consecutive weeks during the year.
What is the FUTA tax, and why is it required?
The FUTA tax, or Federal Unemployment Tax Act tax, is a federal unemployment tax employers pay to fund unemployment benefits. It applies to the first 7,000 of wages paid annually and supports state unemployment insurance programs.
What was the FUTA tax rate for the 2022 tax year?
For 2022, the FUTA tax rate was 6.0 percent on the first $7,000 of wages paid per employee. Most employers qualified for a credit of up to 5.4 percent, resulting in a reduced effective rate of 0.6 percent.
Which states were subject to credit reduction in 2022?
Credit reduction applied to California, Connecticut, Illinois, New York, and the U.S. Virgin Islands. Employers in these states paid a higher federal unemployment tax and had to complete Schedule A when filing their tax return.
Can employers file Form 940 late or amend it after the due date?
Yes, employers may file or amend Form 940 if errors are found or deadlines were missed. Filing late may incur penalties and interest, but submitting your taxes promptly helps manage your account balance and maintain compliance with IRS requirements.
How can employers pay the federal unemployment tax owed?
Employers can pay the federal unemployment tax electronically through the IRS EFTPS system or by mailing a check. Payments must be made by the due date to avoid penalties and interest on any outstanding balance.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library.
