What IRS Form 940 (2023) Is For

Form 940 is used to report your annual Federal Unemployment Tax Act (FUTA) tax, which funds unemployment compensation for workers who have lost their jobs (IRS Instructions for Form 940 (2023)). You must file Form 940 if you paid wages of $1,500 or more in any calendar quarter during 2022 or 2023, or if you had one or more employees for at least some part of a day in any 20 or more different weeks in either year. Only employers pay FUTA tax—you don't collect or deduct it from your employees' wages (IRS Topic 759).

When You'd Use Form 940 for 2023 (Late or Amended Filing)

You would file a late Form 940 for 2023 if you missed the original January 31, 2024 deadline (or February 12, 2024 if you deposited all FUTA tax timely) and received IRS notices demanding the return or assessing penalties and interest. Common scenarios include receiving Notice CP161 (unfiled return) or Notice CP215 (balance due), discovering errors after filing your original return, or claiming credit for state unemployment taxes paid after your original filing deadline (IRS Instructions for Form 940 (2023)). For amended returns, you're correcting previously filed information, such as adjusting FUTA wages, claiming additional state unemployment tax credits, or fixing calculation errors.

Key Rules Specific to 2023

For 2023, the FUTA tax rate remained 6.0% on the first $7,000 of wages paid to each employee, with employers typically receiving a maximum credit of 5.4% for timely state unemployment tax payments, resulting in a net rate of 0.6% (IRS Instructions for Form 940 (2023)). Three jurisdictions were credit reduction states for 2023: California and New York (both at 0.6% reduction rate) and the U.S. Virgin Islands (3.9% reduction rate), meaning employers in these areas paid additional FUTA tax (Schedule A Form 940 (2023)). Moving expense and bicycle commuting reimbursements remained subject to FUTA tax during 2023 due to Tax Cuts and Jobs Act provisions.

Step-by-Step (High Level)

• Gather your records: Collect wage records, state unemployment tax payments, and any prior year transcripts using Form 4506-T or online transcript services (IRS.gov business tax transcripts)
  
  
• Complete the correct form: Use the 2023 version of Form 940, checking the "amended return" box if correcting a previously filed return, and attach Schedule A if you paid wages in multiple states or credit reduction states
  
  
• Calculate accurately: Apply the 0.6% net FUTA rate (6.0% minus 5.4% credit) to the first $7,000 of each employee's wages, adding credit reduction amounts if applicable
  
  
• Attach required schedules: Include Schedule A for multi-state employers or credit reduction situations, and provide explanations for amended returns
  
  
• File and pay: Mail paper returns to the "without payment" address unless including payment, or file electronically when available for amended returns; make payments using EFTPS or approved electronic methods (IRS Instructions for Form 940 (2023))
  
  
• Keep copies: Maintain all records for at least four years from the due date or date filed, whichever is later
  
  

Common Mistakes and How to Avoid Them

• Wage base errors: Remember FUTA applies only to the first $7,000 paid to each employee per year—don't include wages above this threshold in your calculations
  
  
• Credit reduction confusion: If you paid wages in California, New York, or U.S. Virgin Islands for 2023, you must complete Schedule A and pay additional tax at the specified reduction rates (Schedule A Form 940 (2023))
  
  
• State tax timing mistakes: You must pay state unemployment taxes by January 31, 2024 (or February 12, 2024 if filing by the extended deadline) to claim the full 5.4% credit
  
  
• Multi-state employer oversights: File Schedule A if you paid wages in more than one state, even if no states have credit reduction rates
  
  
• EIN and business name mismatches: Ensure your Employer Identification Number and business name exactly match your IRS records to avoid processing delays (IRS Instructions for Form 940 (2023))
  
  
• Exempt wage inclusions: Don't include payments like certain fringe benefits, group-term life insurance over $50,000, or wages paid to corporate officers if excluded from state unemployment tax
  
  

What Happens After You File

The IRS typically processes employment tax returns within 6-8 weeks, though late or amended returns may take longer (IRS.gov correcting employment taxes). You'll receive notices confirming receipt and any adjustments, including penalty and interest assessments for late filing or payment. If you can't pay the full amount due, you can request an installment agreement using Form 9465 or apply online through the IRS payment plan system (IRS.gov payment plans). You have appeal rights if you disagree with IRS determinations—respond to notices within the specified timeframes or request Appeals Office review for disputed issues. Penalties include 5% per month for late filing (maximum 25%) and varying rates for late deposits, plus interest on all unpaid amounts (IRS Instructions for Form 940 (2023)).

FAQs

How long do I have to file a late 2023 Form 940?

There's no statute of limitations for unfiled returns, but filing late triggers penalties and interest. File as soon as possible to minimize additional charges and stop penalty accrual.

Can I get transcripts of my previously filed Form 940?

Yes, request business tax transcripts using Form 4506-T or online at IRS.gov. Account transcripts show payments and adjustments, while return transcripts show filed information (IRS.gov business tax transcripts).

What if I discover I overpaid FUTA tax on my 2023 return?

File an amended Form 940 checking the "amended" box and include an explanation. The IRS will process your refund claim, subject to the statute of limitations (generally 3 years from the filing deadline or 2 years from payment date).

Do I need to amend my state unemployment returns if I amend Form 940?

Not necessarily. Form 940 amendments typically don't require state return changes unless your FUTA wage amounts or employee counts affect state unemployment tax calculations. Check with your state unemployment agency.

What's the penalty for filing Form 940 late?

The failure-to-file penalty is 5% of unpaid tax per month (maximum 25%), plus failure-to-pay penalty of 0.5% per month (IRS.gov failure to file penalty). Interest accrues on all unpaid amounts at federally determined rates.

Can I file an amended 2023 Form 940 electronically?

As of 2024, amended Form 940 filing became available through Modernized e-File, but check current IRS.gov updates for availability. Previously, all amended returns required paper filing (IRS Instructions for Form 940 (2023)).

What if I missed quarterly FUTA tax deposits for 2023?

You'll owe failure-to-deposit penalties ranging from 2% to 15% depending on how late the deposits were, plus interest. Pay the outstanding amount immediately and consider requesting penalty abatement if you have reasonable cause (IRS.gov failure to deposit penalty).

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