Form 940 2022: Employer’s Annual Federal Unemployment (FUTA) Tax Return
Understanding Form 940’s Purpose
Form 940 reports annual Federal Unemployment Tax Act (FUTA) liability for employers. The 2022 tax year maintains the standard 6.0% FUTA tax rate, with most employers receiving a maximum credit of 5.4%, resulting in an effective rate of 0.6%. This applies to taxable wages capped at $7,000 per employee annually. Employers in states subject to credit reduction must pay additional federal unemployment tax when filing their Form 940.
Preparation and Filing Steps
Step 1: Verify Employer Identification Details
Ensure your Employer Identification Number (EIN) and legal entity name match your official business registration exactly. Do not use trade names in place of your legal business name. If you have not yet received your EIN, write “Applied For” in the EIN field along with the application date. Accurate identification is critical for proper tax record matching and processing.
Step 2: Identify Your Return Type
Mark the applicable box in Part 1 to indicate your return type. Options include Amended (correcting a previously filed 2022 return), Successor employer (reporting wages paid by a predecessor), No payments to employees in 2022 (if you made no employee payments during the year), or Final (if your business closed or stopped paying wages). Only select the boxes that apply to your situation. Amended returns must be clearly designated to prevent processing errors.
Step 3: Report State Unemployment Tax Jurisdiction
Complete line 1a or line 1b to identify 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 in multiple states, check the box on line 1b and attach Schedule A (Form 940). You must complete this section even if your unemployment tax rate for the state was zero. Multi-state employers are required to attach Schedule A.
Step 4: Identify Credit Reduction States
Check the box on line 2 if you paid wages in any state subject to credit reduction. For 2022, the states with credit reductions were California, Connecticut, Illinois, New York, and the U.S. Virgin Islands. Employers who paid wages in these jurisdictions must complete Schedule A (Form 940) to calculate the additional FUTA tax owed due to credit reduction. This is not an optional adjustment but an extra tax requirement.
Step 5: Calculate Total Taxable FUTA Wages
Begin by entering total payments to all employees on line 3. Subtract exempt payments on line 4, which include fringe benefits, group-term life insurance over $50,000, retirement and pension contributions, and dependent care assistance. On line 5, subtract total wages exceeding $7,000 per employee, as only the first $7,000 paid to each employee is subject to FUTA tax. The result on line 7 represents your total taxable FUTA wages for 2022.
Step 6: Compute Base FUTA Tax
Multiply line 7 (total taxable FUTA wages) by 0.006 and enter the result on line 8. This calculation assumes you are eligible for the maximum credit of 5.4% against the standard 6.0% FUTA tax rate. Line 8 shows your initial FUTA tax amount before any adjustments for wages excluded from state unemployment taxes or credit reductions.
Step 7: Apply Adjustments for State-Excluded Wages
If all your taxable FUTA wages were excluded from state unemployment tax, multiply line 7 by 0.054 and enter the result on line 9. If only some wages were excluded from the state unemployment tax, or if you paid the state unemployment tax after the Form 940 filing deadline, complete the worksheet provided in the 2022 instructions and enter the calculated amount on line 10. These adjustments account for situations where you cannot claim the complete credit for state unemployment tax.
Step 8: Enter Credit Reduction Amount
If you paid wages in a credit reduction state (line 2 checked), complete Schedule A (Form 940) to calculate your credit reduction amount. Transfer the total credit reduction from Schedule A to Form 940, line 11. For 2022, California, Connecticut, Illinois, and New York had a credit reduction rate of 0.3%, while the U.S. Virgin Islands had a rate of 3.6%. This figure represents additional FUTA tax owed beyond the standard amount.
Step 9: Calculate Total FUTA Tax After Adjustments
Add lines 8, 9, 10, and 11 together and enter the total on line 12. This amount represents your final FUTA tax liability for 2022 after all adjustments have been applied. This total determines your deposit requirements and whether you need to complete Part 5 of the form.
Step 10: Report Total FUTA Deposits Made
Enter the total number of FUTA tax deposits you made in 2022 on line 13. Include all deposits made through the Electronic Federal Tax Payment System (EFTPS) throughout the year. If you applied an overpayment from a prior year to your 2022 tax liability, include that amount as well. Ensure your deposit records are reconciled against your quarterly tax liability calculations.
Step 11: Determine Balance Due or Overpayment
If line 12 exceeds the value of line 13, subtract line 13 from line 12 and enter the balance due on line 14. If the balance owing exceeds $500, you must deposit the amount via EFTPS. If the balance due is $500 or less, you may either deposit the amount via EFTPS or pay by check, money order, credit card, debit card, or electronic funds withdrawal with your Form 940 filing. If line 13 exceeds line 12, enter the overpayment on line 15 and indicate whether you want the amount applied to your next return or refunded to you.
Step 12: Report Quarterly FUTA Tax Liability
Complete Part 5 (lines 16a through 16d) only if line 12 is more than $500. Enter your actual FUTA tax liability, not your deposits, for each calendar quarter: first quarter (January 1 through March 31), second quarter (April 1 through June 30), third quarter (July 1 through September 30), and fourth quarter (October 1 through December 31). The sum of lines 16a through 16d must equal line 12. If line 12 is $500 or less, skip Part 5 and proceed to Part 6.
Step 13: Complete Third-Party Designee Section
Part 6 allows you to authorize the IRS to discuss your Form 940 with a third-party designee, such as your accountant, tax preparer, or payroll service provider. If you choose to designate someone, enter “Yes” and provide their name, phone number, and a five-digit personal identification number (PIN) they will use when contacting the IRS. If you would rather not designate anyone, enter “No.”
Step 14: Sign and Date the Form
Both pages of Form 940 must be completed with your business name and EIN visible. The form must be signed and dated in Part 7 by an authorized person. Acceptable signatories include sole proprietors, corporate officers (such as president, vice president, or principal officers), partners, or authorized representatives with a valid power of attorney. The signature certifies, under penalty of perjury, that the return is true, correct, and complete.
Step 15: Attach Required Schedules and File
If you are a multi-state employer or paid wages in a credit reduction state, attach Schedule A (Form 940) to your return. Ensure all forms show your complete business name and EIN on every page. File Form 940 by January 31, 2023, or by February 10, 2023, if you deposited all FUTA tax when due. Electronic filing is encouraged and available through authorized IRS e-file providers. Mail paper returns are sent to the address specified in the instructions, based on your location and whether you are including a payment.
Key Filing Deadlines and Requirements
The filing deadline for Form 940 for tax year 2022 is January 31, 2023. However, if you deposited all required FUTA tax on time throughout the year, your filing deadline extends to February 10, 2023. Make deposits by electronic funds transfer using EFTPS or through same-day wire payment arranged with your financial institution. Quarterly deposits are required when your cumulative FUTA tax exceeds $500. Fourth quarter liability, if $500 or less, may be paid with your return instead of being deposited separately.
Avoiding Common Errors
Always verify that your EIN matches IRS records exactly. Ensure that all dollar amounts are calculated accurately, particularly when determining wages that exceed the $7,000 threshold per employee. Do not confuse tax deposits with tax liability when completing Part 5. Remember that a credit reduction is an additional tax, not a benefit or optional adjustment. File on time to avoid penalties and interest charges. Keep accurate payroll records and state unemployment tax payment documentation to support your Form 940 entries. Double-check that Schedule A is attached when required for multi-state employers or situations involving credit reduction.
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.
