Employers use IRS Form 940 (2024) to report their annual Federal Unemployment Tax Act (FUTA) obligations. This form helps fund unemployment compensation programs administered by the federal government to support workers who lose their jobs. 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 20 or more different weeks during the year must file this form annually. Filing ensures compliance with federal unemployment tax laws and helps determine credit eligibility against state unemployment contributions.
Employers use Form 940 to calculate the total FUTA tax due, apply allowable credits, and report any balance that remains after deposits. The due date for filing the 2024 return is January 31, 2025. If all FUTA taxes were paid on time, the IRS allows an extended deadline of February 10, 2025.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions for IRS Form 940 (2024): Employer’s Annual FUTA Return, see our comprehensive guide.
What Form 940 Is For
Form 940 reports the annual federal unemployment tax under the Federal Unemployment Tax Act (FUTA), which funds state unemployment programs. Employers pay this tax on the first $7,000 of wages per employee, which is not deducted from the worker's pay. The 2024 FUTA tax rate is 6.0%, with most employers receiving a 5.4% credit for timely state payments, resulting in an effective rate of 0.6%. Credit reduction states pay a higher rate.
When You’d Use Form 940
Employers must file Form 940 each year to report and pay FUTA tax. It applies to all businesses that meet the filing requirements, regardless of size or industry. Those who missed the January 31, 2025, due date must file a late return as soon as possible to reduce penalties and interest.
An amended return may be required if an employer discovers an error on a previously filed form or receives a notice from the IRS about missing or inaccurate information. To file an amended return, use the 2024 version of Form 940 and check the “Amended return” box at the top of the form. The IRS has not issued a separate Form 940-X, so corrections are made directly on the same-year form.
Key Rules or Details for 2024
For 2024, certain states faced FUTA credit reductions. Employers in California and New York experienced a 0.9% reduction in their standard credit, while the U.S. Virgin Islands saw a 4.2% decrease in their standard credit. These changes increase the effective FUTA tax rate for affected employers.
Important details:
- FUTA wage base: $7,000 per employee
- Standard FUTA tax rate: 6.0%
- Credit reductions: California, New York, Virgin Islands
- Applies to wages paid during the 2024 calendar year
Employers must make quarterly deposits. If FUTA tax liability exceeds $500 in any calendar quarter, payment is due by the last day of the following month.
Step-by-Step (High Level)
1. Gather records and information.
Collect wage reports, prior-year Form 940 copies, payroll summaries, and IRS account transcripts to confirm that all reported wages and deposits match.
2. Complete the correct-year form.
Use the official 2024 Form 940. If amending a prior return, mark the “Amended return” box and update any inaccurate information.
3. Attach required schedules.
Include Schedule A if the business operates in multiple states or in a state with a credit reduction, such as California, New York, or the Virgin Islands.
4. Calculate penalties and interest.
Determine whether late filing or payment penalties apply. The failure-to-file penalty equals 5% of the unpaid tax per month, up to a maximum of 25% of the unpaid tax. Late payment penalties may also apply.
5. File and pay the balance.
Employers can file electronically through IRS e-file or by mailing the return to the appropriate IRS processing center. Payments can be made electronically through EFTPS or by check or money order.
6. Retain documentation.
Keep all filed forms, schedules, payment confirmations, and correspondence with the IRS for at least four years for reference and potential audit purposes.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide to Payroll & Employment Tax Forms.
Common Mistakes and How to Avoid Them
Common mistakes when completing Form 940 can lead to IRS penalties or delayed processing, but understanding the correct procedures helps employers stay compliant. The following are key areas to review carefully:
- Incorrect calculation of taxable wages: Employers should include only the first $7,000 of each employee’s annual wages subject to FUTA tax.
- Using the wrong tax year’s form: Every employer must use the correct year’s version of Form 940 to ensure that all reported information aligns with IRS filing and payment records.
- Failing to check the amended return box: When correcting a previously submitted form, employers must mark the “Amended return” box to clearly identify the filing as a correction.
- Improper credit reduction reporting: Businesses operating in credit reduction states such as California, New York, or the U.S. Virgin Islands must correctly apply FUTA credit reductions to avoid underpayment issues.
- Including exempt payments in taxable wages: Employers should exclude payments not subject to FUTA tax—such as contributions to health insurance or retirement plans—when calculating taxable wages.
- Late or missed FUTA deposits: FUTA deposits must be made promptly whenever quarterly tax liability exceeds $500.
What Happens After You File
After filing, the IRS typically processes Form 940 within a few weeks, with electronic filings being completed more quickly than paper submissions. Employers may receive notices for missing information or discrepancies. If additional tax is due, the IRS issues a balance notice, and payment plans can be arranged using Form 9465 or an IRS online account. Interest and penalties accrue until full payment is made. Employers may appeal determinations through the IRS Office of Appeals.
FAQs
What is IRS Form 940 (2024) used for?
IRS Form 940 (2024) reports the employer’s annual federal unemployment tax return under the Federal Unemployment Tax Act. Employers pay FUTA tax on wages paid to employees, funding federal government unemployment programs for workers who lose their jobs.
Who must file under the Federal Unemployment Tax Act?
Employers who paid $1,500 or more in wages in any calendar quarter or had one or more employees working during 20 weeks of the year must file under the Unemployment Tax Act FUTA to meet federal requirements.
How is the FUTA tax rate and maximum credit determined?
The FUTA tax rate for 2024 is 6.0% on the first $7,000 of wages paid per employee. Employers generally receive a maximum credit of 5.4% if they pay their state unemployment taxes on time and in full.
What are taxable wages under Form 940?
Taxable wages include the first $7,000 paid to each employee during the calendar year. Certain payments, such as employer health benefits or retirement contributions, may be excluded when calculating the total tax required under the law.
What happens if employers file Form 940 late?
If an employer fails to file or pay the FUTA tax on time, the IRS may assess penalties and interest. The penalty can reach 5% per month of the unpaid balance, with a maximum of 25% of the total amount due.
For more resources on filing or understanding prior-year IRS forms, visit our Form Summaries and Guides Library.
