Form 940 (2018) Checklist: Employer’s Annual Federal Unemployment Tax Return
Purpose
Form 940 reports annual FUTA tax liability for employers. The 2018 filing year applies the $7,000 wage threshold per employee and requires credit reduction state calculations where applicable. Employers with qualifying wages must file this return to fulfill federal unemployment tax obligations.
Filing Requirements
Who Must File
File Form 940 if you answer “Yes” to either question: Did you pay wages of $1,500 or more to employees in any calendar quarter during 2017 or 2018? Did you have one or more employees for at least part of a day in any 20 or more weeks in 2017 or 2018? Count all full-time, part-time, and temporary employees, but do not count partners if your business is a partnership.
Due Date
The filing deadline is January 31, 2019. If you deposited all FUTA tax when due, you may file by February 11, 2019.
Step-by-Step Completion Guide
Step 1: Enter Basic Information
Verify your EIN and confirm the entity type (sole proprietor, partnership, corporation, or other). If your EIN application is pending, write “Applied For” with the application date in the EIN field. Enter your business name exactly as it appears on your EIN application and use the trade name field only if it is different from your legal business name. Ensure the EIN matches exactly what the IRS assigned to your business, as filing with an incorrect EIN may result in penalties and processing delays.
Step 2: Select Return Type
Check the applicable boxes at the top of the form, noting that you may select more than one box if multiple circumstances apply. Check “Amended” if correcting a previously filed 2018 Form 940 (note that there is no separate Form 940-X; use the same Form 940 and check the amended box). Check “Successor employer” if you acquired all property substantially from a predecessor business and are reporting wages paid before the acquisition. Check “No payments to employees in 2018” if you made no payments during 2018, then complete Part 7 signature section and file. Check “Final” to see if your business closed or stopped paying wages, and you will not file Form 940 in future years.
Step 3: Report State Unemployment Tax Filing Status
Complete either Line 1a or Line 1b based on where you paid state unemployment taxes. If you paid state unemployment tax in only one state, enter the two-letter state abbreviation on Line 1a. If you paid state unemployment tax in more than one state, check the box on Line 1b and complete Schedule A (Form 940). Complete Line 1a or 1b if you had a state unemployment tax rate above zero; otherwise, leave both lines blank only if all wages paid to all employees in all states were excluded from state unemployment tax.
Step 4: Determine Credit Reduction Status
Check Line 2 if you paid wages subject to credit reduction, then complete Schedule A (Form 940) to calculate the additional tax owed. For 2018, only the U.S. Virgin Islands was a credit reduction jurisdiction with a 2.4% rate. If you did not pay wages in the Virgin Islands during 2018, leave Line 2 unchecked and do not complete Schedule A unless you are a multi-state employer, as required in Step 3.
Step 5: Calculate Total Payments
Report all payments made to employees on Line 3, including wages, salaries, bonuses, and other taxable compensation paid during 2018. This figure represents gross payments before any exemptions or exclusions and includes all amounts paid to employees, regardless of whether they exceed the $7,000 wage base or qualify for exemptions.
Step 6: Identify Exempt Payments
List all FUTA-exempt payments on Line 4 and check applicable subcategories: Line 4a for fringe benefits exempt from FUTA tax, Line 4b for group-term life insurance contributions, Line 4c for retirement and pension contributions, Line 4d for dependent care assistance payments, and Line 4e for other exempt payments as defined by statute. Attach detailed documentation if claiming non-standard exemptions. Note that moving expense reimbursements and bicycle commuting benefits became subject to FUTA tax in 2018 and should not be reported as exempt on Line 4.
Step 7: Report Excess Wages and Calculate Taxable FUTA Wages
Calculate wages paid to each employee exceeding the $7,000 annual threshold and enter the total on Line 5, as only the first $7,000 paid to each employee is subject to FUTA tax. Add Lines 4 and 5 together and enter the result on Line 6 (subtotal). Subtract Line 6 from Line 3 to calculate Line 7 (total taxable FUTA wages), which represents the actual wages subject to FUTA tax after exemptions and the wage base limit.
Step 8: Calculate FUTA Tax Before Adjustments
To get Line 8, multiply Line 7 by 0.006. This rate represents the net FUTA tax rate of 0.6% (the standard 6.0% rate minus the maximum 5.4% state credit) expressed as a decimal. This calculation assumes you are entitled to the maximum credit for timely state unemployment tax payments.
Step 9: Complete Adjustments in Part 3
Complete Line 9 if all taxable FUTA wages were excluded from state unemployment tax by multiplying Line 7 by 0.054, which accounts for the lost state credit when wages are not subject to state unemployment tax. Complete Line 10 if only some taxable FUTA wages were excluded from state unemployment tax, or if you paid state unemployment tax after the Form 940 due date by using the worksheet in the instructions to calculate the correct amount. Complete Line 11 if credit reduction applies by entering the total from Schedule A (Form 940), which applies only to Virgin Islands employers for 2018.
Step 10: Determine Total Tax and Balance
Add Lines 8, 9, 10, and 11 to calculate Line 12 (total FUTA tax after adjustments), then enter total FUTA deposits made during 2018 on Line 13, including any overpayment from a prior year applied to 2018. If Line 12 exceeds Line 13, enter the difference on Line 14 (Balance Due); if the balance exceeds $500, you must deposit electronically using EFTPS and should not mail payment with the return, but if the balance is $500 or less, you may pay with Form 940 using the Form 940-V payment voucher. If Line 13 exceeds Line 12, enter the difference on Line 15 (Overpayment) and indicate whether to apply it to the next return or receive a refund.
Step 11: Report Quarterly Tax Liability
Complete Part 5 (Lines 16a through 16d) only if Line 12 exceeds $500 by reporting your actual tax liability for each quarter, not the amount deposited. Enter the liability amount for Line 16a (first quarter: January 1–March 31), Line 16b (second quarter: April 1–June 30), Line 16c (third quarter: July 1–September 30), and Line 16d (fourth quarter: October 1–December 31). Line 17 must equal Line 12, and you should leave any quarter blank if you had no liability for that period. Failure to complete Part 5 when Line 12 exceeds $500 may result in penalties.
Step 12: Authorize Third-Party Designee
Complete Part 6 to authorize an employee, paid tax preparer, or other person to discuss the return with the IRS by selecting “Yes” or “No.” If you choose “Yes,” provide the designee’s name, phone number, and create a five-digit personal identification number (PIN) that will be used when the designee contacts the IRS on your behalf.
Step 13: Sign and Date the Return
Complete both pages of Form 940 before signing, then in Part 7, the authorized person must sign and date the return, print their name and title, and provide a daytime phone number. The IRS will not process unsigned returns because they are invalid. If a paid preparer completes the return, they must provide their PTIN, signature, date, firm name, firm EIN, address, and phone number in the paid preparer section.
Deposit Requirements
When Deposits Are Required
Deposits must be made quarterly when your cumulative FUTA tax liability exceeds $500. Determine your liability each quarter by calculating the first $7,000 of each employee’s wages subject to FUTA tax multiplied by 0.006, then carry forward any amount under $500 to the next quarter. If your FUTA tax is $500 or less in a quarter, you are not required to deposit until the cumulative amount exceeds $500.
Deposit Deadlines
Make deposits by the last day of the month following the end of the quarter: first quarter liability by April 30, second quarter liability by July 31, third quarter liability by October 31, and fourth quarter liability by January 31 (or pay with Form 940 if $500 or less). In years when there are credit reduction states, you must include liabilities owed for credit reduction with your fourth quarter deposit. If any deposit due date falls on a Saturday, Sunday, or a legal holiday, you may deposit on the next business day.
How to Deposit
All federal tax deposits must be made electronically through the Electronic Federal Tax Payment System (EFTPS). Register at EFTPS.gov or call 800-555-4477 for enrollment, or authorize your tax professional, financial institution, or payroll service to make deposits on your behalf. For an EFTPS deposit to be considered on time, you must submit it by 8 p.m. Eastern Time the day before the deposit is due. If you fail to submit a deposit transaction on EFTPS by 8 p.m. Eastern time, you can arrange a same-day wire payment through your financial institution, though fees may apply.
2018-Specific Information
TCJA-Related Changes
Moving expense reimbursements and bicycle commuting benefits became subject to FUTA tax beginning in 2018 due to the provisions in the Tax Cuts and Jobs Act that suspended certain exclusions. Do not report these payments on Line 4 as exempt payments for tax year 2018 or subsequent years through 2025. Ensure W-2 reporting consistency with Form 940 wage totals for proper employment tax compliance.
Credit Reduction State
The U.S. Virgin Islands was the only jurisdiction with a credit reduction in 2018, at a 2.4% rate. Employers who paid wages subject to Virgin Islands unemployment tax must complete Schedule A (Form 940) and pay additional FUTA tax based on this credit reduction rate. A credit reduction state has not repaid money borrowed from the federal government to pay unemployment benefits, and the Department of Labor determines which jurisdictions are subject to credit reduction each year.
Filing Address
During the 2018 tax year, filing addresses underwent changes based on the filing date and your location. Use the address specified in the instructions based on whether you are filing with or without payment and whether you are filing before or after June 17, 2019. Private delivery services may not deliver to P.O. boxes. For P.O. box addresses, use the U.S. Postal Service. Alternatively, visit IRS.gov/PDS for the current list of approved private delivery services and their corresponding street addresses.
Common Errors to Avoid
Avoid these frequent mistakes when completing Form 940: failing to check the amended return box when correcting a previously filed return (there is no Form 940-X); incorrectly claiming credit reduction for states other than the Virgin Islands in 2018; omitting Part 5 when Line 12 exceeds $500, which may result in penalties; making deposits when cumulative liability is $500 or less; filing without proper signatures from authorized persons, which renders the return invalid; confusing the 5.4% maximum credit with the credit reduction percentage; and reporting deposits on Lines 16a-16d instead of actual quarterly tax liability.
Additional Resources
Electronic filing is available through approved IRS e-file providers at IRS.gov/EmploymentEfile, and you can use EFTPS to make deposits or pay in full. For questions about unemployment tax accounts, state reporting numbers, or state experience tax rates, contact your state unemployment agency directly, as the IRS does not maintain unemployment account information. The Department of Labor maintains a list of state unemployment agencies at oui.doleta.gov/unemploy/agencies.asp for your reference.
Need Help With Your Tax Filing?
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
We offer:
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Call now before filing: (888) 260-9441
Fast transcript pull available
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
