What IRS Form 940 (2024) Is For

Form 940 is used to report your annual Federal Unemployment Tax Act (FUTA) tax, which funds unemployment compensation programs for workers who have lost their jobs (IRS.gov, About Form 940). All employers who paid wages of $1,500 or more in any calendar quarter, or had one or more employees for at least part of a day in any 20 or more different weeks during the year, must file Form 940 annually.

When You'd Use Form 940 for 2024 (Late or Amended Filing)

You'll need to file a late or amended Form 940 for 2024 if you missed the January 31, 2025 deadline (February 10, 2025 if all FUTA taxes were deposited timely), received IRS notices about unfiled returns, or discovered errors on your previously filed return. Late filing often occurs when employers receive CP notices indicating missing returns or outstanding tax balances. For amended returns, check the "Amended return" box in the top right corner of Form 940 rather than using a separate "X" form, as the IRS has not created a Form 940-X (IRS.gov, Correcting Employment Taxes).

Key Rules Specific to 2024

The 2024 tax year included significant FUTA credit reductions for certain jurisdictions. California and New York faced a 0.9% credit reduction, reducing their standard 5.4% credit to 4.5%, while the Virgin Islands had a 4.2% credit reduction (Department of Labor, FUTA Credit Reductions). This means employers in these areas paid higher effective FUTA tax rates. The FUTA wage base remained $7,000 per employee, unchanged since 1983, with the standard 6.0% tax rate (IRS Instructions for Form 940, 2024).

Step-by-Step (High Level)

• Gather transcripts and records: Obtain wage and tax records, prior year Forms 940, and account transcripts from the IRS to ensure accuracy
  
  
• Complete the correct-year form: Use the official 2024 Form 940, checking "Amended return" if correcting a previously filed return
  
  
• Attach required schedules: Include Schedule A if you have employees in credit reduction states or multiple states
  
  
• Calculate penalties and interest: Determine late filing penalties (5% per month up to 25%) and late payment penalties if applicable (IRS.gov, Failure to File Penalty)
  
  
• File and pay: Submit via mail to the appropriate IRS processing center or e-file if available, and pay any balance due immediately to minimize additional penalties
  
  
• Keep copies: Retain all forms, schedules, and payment records for at least four years
  
  

Common Mistakes and How to Avoid Them

• Miscalculating FUTA taxable wages: Only the first $7,000 per employee is subject to FUTA tax; wages above this amount should be excluded from the taxable wage calculation
  
  
• Missing credit reduction requirements: Employers in California, New York, and Virgin Islands must reduce their FUTA credit and use Schedule A to report the additional tax owed
  
  
• Incorrect quarterly liability calculations: Each quarter's FUTA tax liability must be calculated separately, and deposits are required when liability exceeds $500 in any quarter
  
  
• Using wrong tax year forms: Always use the 2024 version of Form 940 for 2024 tax year, not the current year's form
  
  
• Forgetting to check "Amended return": When correcting a previously filed return, the amended return box must be checked to avoid processing delays
  
  
• Including exempt wages: Certain payments like health insurance premiums and retirement contributions may be exempt from FUTA tax and should not be included in taxable wages
  
  

What Happens After You File

The IRS typically processes employment tax returns within several weeks, with electronic filings processed faster than paper returns. You'll receive notices if additional information is needed or if there are discrepancies. If you owe money but cannot pay immediately, you can request an installment agreement using Form 9465 or apply online through your IRS account (IRS.gov, Payment Plans). Interest and penalties continue to accrue until the balance is paid in full. If you disagree with any IRS determination, you have appeal rights and can request a conference with the IRS Appeals Office within the timeframe specified in your notice.

FAQs

What penalties apply for late filing of Form 940?

The failure-to-file penalty is 5% of unpaid tax per month (or part of a month), up to 25% maximum. Late payment penalties also apply and vary based on how late the payment is made (IRS.gov, Failure to File Penalty).

Can I get account transcripts for unfiled Form 940 years?

Yes, request wage and income transcripts and account transcripts from the IRS to see what employment tax information they have on file. This helps ensure accuracy when filing late returns.

Is there a refund statute of limitations for Form 940 overpayments?

Generally, you have three years from the due date of the return or two years from when you paid the tax (whichever is later) to claim a refund of overpaid FUTA taxes.

Should I amend my state unemployment returns if I amend Form 940?

While Form 940 is federal-only, you should review your state unemployment tax returns for consistency. States have their own amendment procedures and deadlines that may differ from federal requirements.

Can I e-file an amended Form 940?

Yes, the IRS allows electronic filing of amended Form 940 returns through the Modernized e-File (MeF) system, making the process faster and more secure than paper filing (IRS.gov, Electronic Filing of Amended Employment Tax Returns).

What's the difference between adjustment and claim processes for overpayments?

Use adjustment to apply overpayments as credits to future tax periods; use claim to request a cash refund. If filing within the last 90 days of the limitations period, you must use the claim process (IRS.gov, Correcting Employment Taxes).

How do I handle FUTA credit reductions for 2024?

If you had employees in California, New York, or Virgin Islands during 2024, you must reduce your FUTA credit and file Schedule A with Form 940 to calculate the additional tax owed due to these states' outstanding federal loan balances (IRS.gov, FUTA Credit Reduction).

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