What IRS Form 940 (2025) Is For

Form 940 is the Employer's Annual Federal Unemployment (FUTA) Tax Return that reports your annual federal unemployment tax (IRS Instructions for Form 940 (2025)). This tax, together with state unemployment systems, funds unemployment compensation for workers who have lost their jobs. You must file Form 940 if you paid wages of $1,500 or more to employees in any calendar quarter during 2024 or 2025, or if you had one or more employees for at least some part of a day in any 20 or more different weeks in 2024 or 2025 (IRS Instructions for Form 940 (2025)).

When You'd Use Form 940 for 2025 (Late or Amended Filing)

You would file a late or amended Form 940 for 2025 in several scenarios: if you received IRS notices about unfiled returns or balance due amounts, if you discovered errors on your original return that need correction, or if you need to claim additional credits for state unemployment taxes paid after your original filing deadline. The normal due date for 2025 Form 940 was February 2, 2026 (or February 10, 2026 if all FUTA taxes were deposited timely) (IRS Instructions for Form 940 (2025)). For refund purposes, you generally have three years from the filing due date or two years from when you paid the tax to claim refunds, whichever is later (IRS Statutes of Limitations for Assessing, Collecting and Refunding Tax).

Key Rules Specific to 2025

For 2025, there are credit reduction states where employers must pay additional FUTA tax (IRS Instructions for Form 940 (2025)). If you paid wages subject to unemployment laws in credit reduction states, you must complete Schedule A (Form 940) to calculate the additional tax owed. The 2025 FUTA tax rate remains 6.0% on the first $7,000 of each employee's wages, with a maximum credit of 5.4% for timely state unemployment tax payments, resulting in an effective rate of 0.6% for most employers (IRS FUTA Credit Reduction).

Step-by-Step (High Level)

• Gather your records: Obtain account transcripts from the IRS business account portal or by calling 800-829-4933 to understand what was previously filed or assessed (IRS Instructions for Form 940 (2025))
  
  
• Complete the correct form: Use the 2025 Form 940 (not current year forms) and include all required information about wages paid and taxes owed during 2025
  
  
• Attach required schedules: Include Schedule A (Form 940) if you had employees in credit reduction states, and Schedule R (Form 940) if you're filing an aggregate return
  
  
• Choose filing method: File electronically through authorized e-file providers or mail paper returns to the address specified for returns "without payment" even if including payment with amended returns (IRS Where to File Your Taxes for Form 940)
  
  
• Keep copies: Maintain copies of all forms, attachments, and supporting documentation for your records
  
  

Common Mistakes and How to Avoid Them

• Using wrong year's form: Always use the 2025 Form 940 for 2025 tax years, not the current year's form, even when filing late
  
  
• Miscalculating FUTA wages: Remember that FUTA applies only to the first $7,000 per employee per year; don't include amounts above this threshold (IRS Federal Unemployment Tax)
  
  
• Missing credit reduction calculations: Employers in credit reduction states must complete Schedule A (Form 940) or face incorrect tax calculations (IRS FUTA Credit Reduction)
  
  
• Incorrect EIN usage: Ensure your Employer Identification Number exactly matches IRS records; mismatched EINs cause processing delays and penalties (IRS Instructions for Form 940 (2025))
  
  
• Forgetting quarterly deposit requirements: If your FUTA tax exceeds $500 in any quarter, deposits are required by the last day of the following month, not just annual filing (IRS Depositing and Reporting Employment Taxes)
  
  
• Missing amended return designation: When filing corrections, check box "a" for amended return and attach explanations for all changes made (IRS Correcting Employment Taxes)
  
  

What Happens After You File

The IRS typically processes Form 940 within several weeks depending on filing method. You may receive notices requesting additional information or confirming adjustments made. If you owe additional tax, you can set up payment plans using Form 9465 for installment agreements, with streamlined options available for balances under $50,000 payable within 72 months (IRS Payment Plans; Installment Agreements). Refunds are now issued via direct deposit when bank information is provided (IRS Instructions for Form 940 (2025)). If you disagree with IRS adjustments, you have appeal rights and can request conferences with IRS Appeals within 30 days of receiving determination notices (IRS Preparing a Request for Appeals).

FAQs

Can I still get a refund if I'm filing Form 940 years late?

Yes, but you must file within three years of the original due date or two years from when you paid the tax to claim refunds. After these periods, refund opportunities expire (IRS Time You Can Claim a Credit or Refund).

What penalties apply to late-filed Form 940?

The failure-to-file penalty is 5% of unpaid tax per month (up to 25% maximum), while failure-to-pay penalties and interest accrue on both unpaid taxes and penalties from the original due date (IRS Information About Your Notice, Penalty and Interest).

Do I need to get transcripts before filing an amended return?

While not required, obtaining account transcripts helps you understand what the IRS has on file and ensures your corrections address the right issues. Access transcripts through your IRS business account or by calling 800-829-4933 (IRS Instructions for Form 940 (2025)).

Should I also amend my state unemployment returns?

Generally yes, if your federal corrections affect state-reported wages or tax calculations. Contact your state unemployment agency as requirements vary by state and corrections may affect your experience rating.

Can I file Form 940 electronically for prior years?

Yes, the IRS now accepts electronic filing of amended Form 940 through Modernized e-File (MeF) systems for faster processing and confirmation (IRS Instructions for Form 940 (2025)).

What if I discover errors after filing my amended return?

You can file additional amended returns if needed. Each amended return should reflect all correct information, not just the changes from the previous filing (IRS Correcting Employment Taxes).

How do I know if my state had credit reduction for 2025?

Check the current year instructions or IRS.gov/FUTA for the official list of credit reduction states and rates, as these change annually based on state unemployment fund balances (IRS FUTA Credit Reduction).

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