IRS Form 940 (2015): Employer's Annual FUTA Tax Return

Form 940 is filed annually by employers to report their Federal Unemployment Tax Act (FUTA) liability to the IRS. It applies to businesses that paid wages in 2015 and are responsible for funding federal unemployment benefits, in addition to their state unemployment tax obligations.

Late Filers

Employers missing the February 1, 2016, deadline may still file Form 940 for 2015, but FUTA penalties and interest will apply to unpaid tax balances.

Multiple Income Sources

Businesses operating in multiple states must report each state's unemployment tax payments and attach Schedule A when wages are paid in multiple or credit-reduction states.

Itemizing Deductions

Employers may reduce FUTA tax using a 5.4 percent credit for timely state unemployment payments, lowering the effective net FUTA rate on wages.

Claiming 2015 Credits

The 2015 credit reduction list identifies states repaying federal unemployment loans, thereby reducing employers' available FUTA credits in those states.

IRS Compliance

Filing Form 940, even late, helps establish IRS compliance records, resolve notices, and stop ongoing failure-to-file penalties from accumulating on outstanding FUTA balances.

Citizens Abroad / Military

FUTA liability for services performed abroad depends on worker classification and whether the employer qualifies as an American employer under IRS statutory guidance.

Complete your 2015 Form 940 correctly with these steps. Some steps use 2015 tax year rules and thresholds and should not be used this year.

1. Gather your documents before starting

Collect all 2015 payroll records, including wages, FUTA taxable wage summaries, and state unemployment tax payments. Use the IRS Business Tax Account or Form 4506-T to confirm prior filings, deposits, or missing records before preparing Form 940 accurately.

2. Choose the correct filing status (2015 Only)

Determine employer category under 2015 FUTA rules: general, agricultural, household, nonprofit, or governmental. General employer filing if wages exceed $1,500 in a quarter or if the 20-week rule applies. Agricultural and household employers follow different thresholds. Avoid outdated classifications, as incorrect status may result in improper liability, rejected filings, or FUTA reporting errors.

3. Report all income on the correct lines

Report total wages paid to employees, then subtract exempt payments such as certain fringe benefits or dependent care assistance. Apply the $7,000 FUTA wage base per employee to determine taxable wages. Report taxable FUTA wage separately and include state unemployment tax contributions to support credit calculations and ensure accurate federal unemployment tax reporting compliance.

4. Calculate Adjusted Gross Income (AGI)

Multiply taxable FUTA wages by the 6.0 percent FUTA rate to compute gross tax. Then apply adjustments such as credit reductions for certain states. These calculations determine final FUTA liability and ensure accurate reconciliation of unemployment tax obligations for the 2015 tax year.

5. Choose your deductions and apply exemptions (2015 Only)

Apply the 5.4 percent credit for timely state unemployment tax payments, reducing FUTA liability. Employers in credit-reduction states must adjust credits using Schedule A. Proper classification ensures the correct net. FUTA tax prevents overpayment, aligns reporting with 2015 federal unemployment tax rules, and supports accurate reconciliation of payroll obligations across multiple jurisdictions.

6. Claim the 2015-specific credit (2015 Only)

Report all FUTA deposits made during 2015 in Form 940 to reduce the final tax due. Deposits apply when quarterly liability exceeds $500. Include all payments accurately to reconcile total liability, ensure compliance, and prevent penalties or balance discrepancies.

Missing W-2s or Tax Records for 2015?

IRS business transcripts and SSA records can assist late filers in reconstructing the information needed to complete and file an accurate return, as they often lack the original 2015 payroll records.

IRS Wage & Income Transcript

Wages and federal tax data reported to the IRS supplement missing payroll records, but employer business tax transcripts are still needed for Form 940 verification.

IRS Account Transcript

This transcript lists filed returns, payments, penalties, and balances, helping confirm whether a 2015 Form 940 was submitted and whether FUTA deposits were properly applied.

Social Security Administration

SSA wage records show earnings reported under an employee’s Social Security number and may supplement missing payroll data when other employer records are incomplete for 2015.

Contact Prior Employers

Employers must retain payroll records for at least four years after taxes are due or paid, so prior employers or payroll providers may still provide 2015 documentation.

Filing late is better than not filing at all. The failure-to-file penalty accrues monthly, and the failure-to-pay penalty also accrues, requiring prompt filing.

Errors on prior-year Form 940 returns cause IRS processing delays or miscalculated FUTA tax, resulting in unexpected balances or missed credits.

• Using the wrong tax year form — Using an incorrect Form 940 year causes mismatched FUTA wage base rules, credit calculations, processing delays, and possible IRS rejection notices.
• Missing Schedule M / 2015-specific credit — Missing Schedule A prevents correct credit reduction calculations for 2015, increasing FUTA tax liability and triggering IRS correction notices or adjustments.
• Wrong filing status label — Selecting an incorrect employer type, such as general, agricultural, or household, misapplies filing thresholds and causes inaccurate overall FUTA filing requirement determinations.
• Applying Pease limitations incorrectly — Incorrect wage base or limitation application distorts taxable FUTA wages, resulting in inaccurate unemployment tax calculations and IRS adjustment actions later.
• Treating unemployment compensation as partially tax-free — Assuming exemptions reduces reported taxable wages incorrectly, lowering FUTA credit eligibility and potentially triggering IRS discrepancies, audits, or compliance review actions.
• Assuming a refund is still available — Most 2015 FUTA refund claims are time-barred under the IRS statute of limitations, making eligibility unlikely unless rare exceptions or adjustments apply.
• Missing or incorrect Social Security numbers — Incorrect EIN or SSN entries prevent IRS matching, delay processing, misapply payments, and trigger account-level discrepancies or official notice issuance.
• Unsigned return — An unsigned Form 940 is invalid for IRS acceptance, causing rejection, processing delays, or a requirement to resubmit the complete return.
• Missing attachments — Failure to include required schedules, such as Schedule A, results in incomplete filing status, IRS correspondence, and possible tax recalculation actions.

What is IRS Form 940 (2015) used for?

Form 940 (2015) is used by employers covered under federal law to report federal unemployment insurance taxes to the federal government for a calendar year, showing the total tax paid under FUTA. It covers wages, including those of agricultural employers and household employees, when employers pay contributions.

Can I still file a 2015 Form 940?

A 2015 Form 940 may still be filed under federal law for prior years, including the preceding year 2015, though penalties and interest continue to accrue in the current year; employers should file even if unable to pay the full tax amount due.

What was the FUTA tax rate for 2015?

The gross FUTA tax rate for 2015 was 6.0 percent on the first $7,000 of wages per employee, with individual state maximum credits reducing the net FUTA tax rate to 0.6 percent when employers meet the general test and timely unemployment insurance requirements.

How do I know whether my state was a credit-reduction state in 2015?

The IRS listed credit reduction states for 2015 in official instructions and at the federal level; if your state was included during the calendar year, employers owed additional FUTA tax across calendar-quarter filings, requiring Schedule A and additional information submissions.

What if I can't pay the full FUTA tax balance for 2015?

Businesses pay partial amounts toward FUTA liability, while the federal government applies penalties and interest. Employers should contact the IRS to arrange to reduce penalty amounts and overall costs, ensuring that any tax paid is credited properly under federal law, even when full payment is not immediately available.

Do I still need to file Form 940 if my business has closed?

Employers covered under federal law must still file the final Form 940 for a closed business reporting one or more employees, including agricultural or household employees, for the calendar year, marking the final return and providing records for the following year's review, if needed.

Can I still claim a refund for overpaid 2015 FUTA taxes?

Refund claims for overpaid FUTA tax paid must follow federal government rules within limits tied to the preceding year or two consecutive years, with unemployment insurance. UI credits are considered; costs and penalties may apply, and additional information is required for verification under federal law.

What happens after I file my 2015 Form 940?

After filing, the federal government processes the return at the federal level during the current year; employers covered receive notice of any tax amount due or refund, example timelines, and may be contacted for additional information or verification if discrepancies are found after filing.