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IRS Form 940 (2018): Employer's Annual FUTA Return
Download, complete, and file your 2018 FUTA tax return accurately. Whether you're filing late, correcting errors, or resolving an IRS notice, this page provides everything you need.
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What Is This Form
Employers use IRS Form 940 (2018) to report and pay FUTA tax for the 2018 calendar year. Only employers pay it, not workers; funding state unemployment insurance programs through federal payroll tax obligations.
Late Filers
Employers missing deadlines may still file Form 940 for 2018, which can stop additional failure-to-file penalties once the IRS receives the return.
Multiple Income Sources
Employers paying unemployment tax in multiple states or credit reduction states must complete Schedule A (Form 940) to report total FUTA liability accurately.
Itemizing Deductions
Employers may reduce FUTA liability by claiming timely state unemployment tax credits, lowering the effective federal unemployment tax rate for qualifying payroll wages.
Claiming 2018 Credits
The maximum 5.4 percent credit in 2018 applied when state unemployment taxes were paid on time, and no state credit-reduction rules applied.
IRS Compliance
Form 940 filing is required for FUTA compliance, but accurate reporting, timely deposits, and correct payments are also necessary to meet IRS obligations.
Citizens Abroad / Military
FUTA rules for employees in U.S. territories and abroad vary, with Puerto Rico, Virgin Islands, and foreign employment subject to special statutory classifications.
Eligibility
Form 940 (2018) is required for employers who meet specific wage or employment thresholds in 2017 or 2018, including those filing late or correcting a prior return. Special rules apply to household, farm, tax-exempt, governmental, and tribal employers.
Late Filers
Employers missing deadlines may still file Form 940 for 2018. Filing late stops further failure-to-file penalties, though prior penalties and interest still apply.
Multiple Income Sources
Employers paying state unemployment tax in multiple states or credit reduction states must file Schedule A with Form 940 to report accurate FUTA liability.
Itemizing Deductions
Employers may reduce FUTA liability by claiming credits for timely state unemployment contributions on wages, provided payments match FUTA taxable wages and qualify.
Claiming 2018 Credits
A maximum 5.4 percent credit applies when state unemployment taxes are paid on time, and no credit reduction state applies.
IRS Compliance
Employers must file Form 940 if they paid $1,500 in wages in any calendar quarter or had employees for 20 weeks or more.
Citizens Abroad / Military
Employers with workers in U.S. territories or abroad must apply FUTA statutory rules based on territory classification and American employer status before filing.
Step-by-Step
Follow the steps below to accurately complete and file IRS Form 940 for the 2018 tax year. Several steps reflect rules and requirements that are specific to this tax year.
1. Gather your documents before starting
Collect payroll records for all wages paid in 2018, including employee earnings, FUTA deposit receipts, state unemployment tax payment records, and any IRS correspondence. These documents ensure accurate reporting, help verify totals, and reduce errors when completing Form 940.
2. Choose the correct filing status (2018)
Review the status boxes on Form 940, including final return, no payments to employees in 2018, successor employer, or amended return. Do not confuse these with “original filing” or entity selection options, since Form 940 only uses specific IRS status indicators to identify reporting changes and ensure accurate federal unemployment tax processing.
3. Report all income on the correct lines
Review the status boxes on Form 940, including final return, no payments to employees in 2018, successor employer, or amended return. Do not confuse these with “original filing” or entity selection options, since Form 940 only uses specific IRS status indicators to identify reporting changes and ensure accurate federal unemployment tax processing and compliance requirements.
4. Calculate Adjusted Gross Income (AGI)
Start with total FUTA-taxable wages, then apply adjustments such as exempt payments and allowable state unemployment tax credits. AGI determines your taxable base for FUTA calculations and directly controls your final unemployment tax liability before credits reduce the amount owed.
5. Choose your deductions and apply exemptions (2018 Only)
Exclude FUTA-exempt wages such as qualifying 501(c)(3) payments, certain household and farm wages, and specific reimbursements affected by the 2018 tax law changes. Standard deduction rules do not apply; instead, follow IRS FUTA-specific exemption thresholds and classification rules for each employer type, ensuring proper wage reporting, accurate calculations, and compliance with federal unemployment tax requirements.
6. Claim the 2018-specific credit (2018 Only)
Apply the state unemployment tax credit on Form 940 to reduce FUTA liability. If subject to credit reduction, such as in the U.S. Virgin Islands for 2018, attach Schedule A to calculate and report the adjusted credit accurately.
Filing Deadline — January 31, 2019
The original due date for Form 940 (2018) was January 31, 2019. Employers who made all required FUTA deposits on time were granted an extended deadline of February 11, 2019. After this date, penalties and interest begin accruing on any unpaid or unfiled balances immediately.
Refund Deadline — Likely Expired
Refund claims for 2018 Form 940 are generally limited to three years from the filing date or two years from the payment date, whichever is later. For most timely-filed returns, the window has likely closed. Employers should consult a tax professional to determine whether rare exceptions or relief provisions apply.
Processing Time — Allow Several Months
The IRS recommends waiting about 6 to 8 weeks after mailing a paper Form 940 or 2 to 3 weeks after e-filing before checking the status. Employers with unpaid balances should pay promptly to reduce interest charges while the return continues to be processed in the system.
Amended Return Rules
Employers who are correcting a 2018 Form 940 should check the Amended box when they file it. The IRS allows electronic submission of amended returns, so paper filing is not required. Supporting documentation should be included to explain corrections and ensure accurate processing of updated unemployment tax information.
Missing W-2s or Tax Records for 2018?
Late filers often lack complete payroll records needed to reconstruct a Form 940 accurately. IRS business transcripts and other official sources can help fill in the gaps and support an accurate filing.
IRS Wage & Income Transcript
For businesses, the IRS provides transcripts containing reported tax returns, accounts, and entity data, helping verify prior filing activity, payments, and employer FUTA compliance information.
IRS Account Transcript
This transcript shows employer tax account history, including deposits, balances, penalties, and IRS notices related to 2018 FUTA obligations, confirming filings, payments, and compliance status.
Social Security Administration
SSA wage records show earnings reported under employees' Social Security numbers, helping verify wage totals when payroll records are missing and supporting accurate FUTA reporting reconstruction.
Contact Prior Employers
IRS rules require employers to retain employment tax records for at least four years after the tax due or payment date, so prior providers may still hold records.
Filing is better than not filing, since the failure-to-file penalty accrues faster than the failure-to-pay penalty, so prompt submission reduces total liability.
Missing W-2s or Tax Records?
You can still complete your return even without original records
Penalties and interest on any unpaid 2018 FUTA balance have been accruing since the original filing deadline. Filing now stops the failure-to-file penalty from continuing to increase, though failure-to-pay penalties and interest may continue until the balance is resolved.
Failure-to-File Penalty
(5% per month, up to 25%)
This penalty accrues at 5% of the unpaid tax per month or partial month while the return remains unfiled, up to a maximum of 25%, reduced by any failure-to-pay penalty applied for the same month.
Failure-to-Pay Penalty
(0.5% per month + interest)
The failure-to-pay penalty is 0.5 percent per month on the unpaid tax balance. It may be reduced under installment agreements or increased after levy notices, while interest accrues separately on both the tax and the penalties until paid.
Penalty Abatement Options
(First-Time Abatement & Reasonable Cause)
The first-time abate program may apply to taxpayers with a clean three-year compliance history. Reasonable cause relief may also apply when circumstances beyond the employer’s control prevented timely filing or payment compliance.
Filing sooner rather than later is strongly advisable. The failure-to-file penalty accrues at a much higher monthly rate than the failure-to-pay penalty, and filing stops further failure-to-file accrual immediately.
The errors below are among the frequent causes of IRS processing delays, inaccurate returns, or missed credits on 2018 Form 940 filings.
- Using the wrong tax year form — Always use the 2018 Form 940 version, since filing another year’s form can cause IRS processing errors or require corrections.
- Missing Schedule M / 2018-specific credit — Employers with multi-state wages or U.S. Virgin Islands unemployment tax must attach Schedule A, or FUTA liability may be underreported.
- Wrong filing status label — Incorrectly checking the amended, successor, no payments, or final boxes leads to IRS misclassification and delays in processing the return.
- Applying Pease limitations incorrectly — Misapplying FUTA credit rules or wage exclusions can distort taxable wages and result in incorrect unemployment tax calculations and penalties.
- Treating unemployment compensation as partially tax-free — Certain 2018 reimbursements were subject to FUTA, and misclassifying them can lead to incorrect exemptions, underreporting wages, and underpaid unemployment tax obligations.
- Assuming a refund is still available — Most 2018 FUTA refund claims are now time-barred under IRS rules, and eligibility should be confirmed before expecting repayment or filing any refund request.
- Missing or incorrect Social Security numbers — Although Form 940 uses an EIN, payroll record Social Security number errors can still create mismatches, delays, and compliance issues during verification processes.
- Unsigned return — A Form 940 without an authorized signature is invalid and will be rejected by the IRS, delaying processing and enforcement resolution.
- Missing attachments — Failing to include required Schedule A or supporting documentation results in incomplete filings and may trigger IRS adjustments or correspondence.
What is IRS Form 940 (2018) used for?
Employers use IRS Form 940 (2018) to report their annual federal unemployment tax liability to the federal government. It is separate from federal income tax and FICA taxes and supports state unemployment programs funded by paid wages for unemployment benefits.
Can I still file a 2018 Form 940?
Yes, most employers can still file a late Form 940 with the Internal Revenue Service for 2018. Filing stops penalties on federal unemployment tax liability, even if employers stopped paying wages or need legal or tax advice for prior filings.
What was the FUTA tax rate for 2018?
The FUTA tax rate was 6.0 percent on paid wages up to $7,000 per employee. Employers may reduce their liability through a FUTA tax credit, depending on their quarterly payments of state unemployment taxes, especially for nonprofit organizations or agricultural employees.
Which state had a credit reduction in 2018?
In 2018, employers in more than one state, including the U.S. Virgin Islands, faced reduced credits, increasing FUTA tax liability. New employers or those with one or more employees must calculate adjustments under federal government unemployment rules for accuracy.
What changed for FUTA in 2018 under the Tax Cuts and Jobs Act?
The Tax Cuts and Jobs Act subjected certain benefits, such as reimbursements for agricultural and household employees, to FUTA. Employers are required to comply with federal income tax guidance and seek tax advice to accurately report paid wages in accordance with the new regulations.
How long does the IRS take to process a Form 940?
The IRS typically processes Form 940 within a few weeks after filing, depending on the timing of quarterly payments. Example delays may occur for first-quarter corrections or if employers have former employees, nonprofit organizations, or at least some part-year wage records.
What happens if I owe FUTA taxes for 2018?
If FUTA tax is owed, employers must pay it to the federal government and may face additional liability. The Internal Revenue Service may assess penalties if the quarterly payment is missed, especially if employers have new employees or multiple state activities.
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