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IRS Form 940 (2020): Employer’s Annual FUTA Return
Report your 2020 FUTA taxes accurately, download the official form, and resolve any outstanding balance with the IRS—whether you're filing late or correcting a prior return.
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What Is This Form
Employers use IRS Form 940 (2020) to report their annual federal unemployment tax liability under the Federal Unemployment Tax Act. It applies to businesses that paid wages subject to FUTA and reconciles the total tax owed with any deposits already made throughout the year.
Late Filers
Employers who miss the February 1, 2021, deadline may still file Form 940 for 2020 to prevent further failure-to-file penalties from accruing.
Multiple Income Sources
Employers paying wages in multiple states or credit reduction states must adjust FUTA credits accordingly and attach Schedule A when required for accuracy.
Itemizing Deductions
Employers must correctly separate total wages, exempt payments, and amounts above the $7,000-per-employee threshold to calculate FUTA taxable wages for 2020.
Claiming 2020 Credits
Eligible employers who paid state unemployment taxes on time can claim a 5.4 percent FUTA credit, significantly lowering their overall effective tax rate.
IRS Compliance
Filing Form 940, even if late, helps establish IRS compliance records, reducing penalties, collection actions, and the risk of liens for unpaid unemployment taxes.
Citizens Abroad / Military
For 2020, qualified moving reimbursements for active-duty military PCS moves remain FUTA-exempt, while most other relocation and commuting reimbursements are taxable.
Eligibility
Form 940 for 2020 applies to employers who paid cash wages subject to federal unemployment tax during the calendar year, including late filings or corrections to prior returns, while most household employers generally use Schedule H instead of Form 940.
Late Filers
Employers missing the February 1, 2021, deadline must still file Form 940 for 2020 to prevent failure-to-file penalties from increasing further.
Multiple Income Sources
Employers paying wages in multiple states or credit reduction states must attach Schedule A (Form 940) to calculate jurisdictional FUTA credit reductions accurately.
Itemizing Deductions
Employers must separate total wages, exempt payments, and amounts above the $7,000 FUTA wage base to ensure correct taxable wage calculations.
Claiming 2020 Credits
To receive the maximum 5.4 percent credit, employers must pay state unemployment taxes on time and avoid credit-reducing states for eligible wages.
IRS Compliance
All FUTA-liable employers must file Form 940 to document compliance, reconcile balances, and report taxes owed; household employers generally use Schedule H instead.
Citizens Abroad / Military
For 2020, qualified PCS moving reimbursements for active-duty military remain FUTA-exempt, while most other relocation and commuting reimbursements are generally taxable.
Step-by-Step
Follow the steps below to complete and submit your 2020 Form 940 accurately. Some steps reflect conditions and rules specific to the 2020 tax year.
1. Gather your documents before starting
Collect all 2020 payroll records, prior Form 940 filings, IRS notices, and state unemployment tax confirmations. Include exempt wage documentation and supporting schedules to ensure accurate FUTA reporting and avoid IRS mismatches or processing delays.
2. Choose the correct filing status (2020 Only)
Form 940 does not use personal filing status. Employers must select an original return, an amended return, a successor employer return, a final return, or a return reporting no payments in 2020. Avoid outdated or incorrect labels, as misclassification can trigger IRS correspondence, payment misapplication, processing delays for FUTA compliance records, and extended IRS review timelines.
3. Report all income on the correct lines
Report total cash wages, bonuses, and compensation on Line 3. Subtract exempt payments on Line 4 and wages above the $7,000 per employee FUTA threshold on Line 5. Line 6 equals Lines 4 and 5 combined, and Line 7 equals Line 3 minus Line 6 as taxable FUTA wages for 2020. Certain moving reimbursements were generally taxable.
4. Calculate Adjusted Gross Income (AGI)
Form 940 does not use AGI directly. Instead, employers apply gross FUTA tax on taxable wages. For reference, AGI typically adjusts income using above-the-line deductions such as retirement contributions and self-employment expenses, which control taxable income levels on individual returns, not payroll tax calculations.
5. Choose your deductions and apply exemptions - flag as ([Year] Only if applicable)
While Form 940 focuses on payroll exemptions rather than income tax deductions, the 2020 federal standard deductions were single, $12,400; married filing jointly, $24,800; and head of household, $18,650. Employers must still identify FUTA-exempt payments, such as fringe benefits and retirement contributions, to ensure accurate taxable wage calculations and reduce the risk of IRS adjustments.
6. Claim the 2020-specific credit - flag as (2020 Only)
Employers may claim up to 5.4 percent FUTA credit for on-time payments of state unemployment taxes in 2020. Credit reduction states require a Schedule A attachment to calculate additional FUTA tax accurately.
Filing Deadline — February 1, 2021
The original due date for Form 940 covering tax year 2020 was February 1, 2021, but it was shifted to January 31 because that date fell on a Sunday. Penalties and interest continue to accrue on any unpaid FUTA tax balances after the filing deadline passes.
Refund Deadline — Likely Expired
Under IRC 6511 and 6513, refunds must generally be claimed within 3 years of filing or 2 years of payment, whichever is later. For the 2020 Form 940, the window is likely closed for most employers. A tax professional should confirm eligibility for rare exceptions.
Processing Time — Allow Several Months
Paper Form 940 returns may take several months to process at IRS service centers due to backlogs. Employers owing tax should not wait for confirmation before paying, as interest and penalties continue to accumulate on any unpaid FUTA balance until it is fully resolved.
Amended Returns — Special Handling Required
To correct a 2020 Form 940, employers must check the amended return box and include a written explanation of changes. These filings typically take longer to process than originals, and any additional tax owed should be paid promptly to minimize ongoing interest charges.
Missing W-2s or Tax Records for 2020?
Late filers may no longer have access to their original 2020 payroll records or wage documents. IRS and Social Security Administration records can often reconstruct some of the information needed to complete and submit the return.
IRS Wage & Income Transcript
An IRS wage & income transcript shows reported income data, such as W-2s and 1099s, but it does not replace employer FUTA wage-base calculations or exemption determinations.
IRS Account Transcript
An IRS account transcript displays filed returns, payments, penalties, and adjustments, helping employers verify what was reported or paid for tax year 2020 FUTA obligations.
Social Security Administration
SSA records can provide copies of W-2 wage statements, but they only reflect employee-level earnings data and do not include full FUTA calculations required under Form 940.
Contact Prior Employers
IRS rules require employers to keep employment tax records for at least four years, so prior 2020 wage records may still be available upon request.
Filing late is better than not filing, as the failure-to-file penalty accrues at 5% per month and the failure-to-pay penalty at 0.5% per month.
Missing W-2s or Tax Records?
You can still complete your return even without original records
Penalties and interest on any unpaid 2020 FUTA balance have accrued since February 1, 2021. Filing Form 940 now generally stops the failure-to-file penalty from increasing, though failure-to-pay penalties and interest continue until the balance is fully paid.
Failure-to-File Penalty
(5% per month, up to 25%)
Employers who fail to file Form 940 on time are charged a 5 percent monthly penalty on unpaid tax, increasing each month the tax is late, up to a 25 percent maximum. If both apply, the filing penalty is reduced.
Failure-to-Pay Penalty
(0.5% per month + interest)
A 0.5 percent monthly penalty applies to unpaid FUTA tax balances, with interest accruing until fully paid. Employers may request installment agreements if eligible, provided they meet IRS requirements, balance limits, filing requirements, and deposit compliance obligations.
Penalty Abatement Options
(First-Time Abatement & Reasonable Cause)
Employers may qualify for a first-time abatement, potentially removing certain penalties. Alternatively, reasonable cause relief may be requested using Form 843, with supporting documentation explaining any filing or payment delays and the circumstances preventing timely compliance with FUTA tax obligations.
Filing late is better than not filing, since failure-to-file is 5 percent monthly while failure-to-pay is 0.5 percent monthly, making filing the priority step.
The following errors are the most frequent causes of IRS processing delays, rejected returns, or missed credits in 2020.
- Using the wrong tax year form — Filing a Form 940 from a different year than 2020 can cause IRS processing errors, delays, and incorrect FUTA tax reporting.
- Missing Schedule M / 2020-specific credit reduction — Omitting Schedule A when required for multi-state wages or U.S. Virgin Islands credit reduction may lead to incomplete FUTA calculations and IRS adjustments.
- Wrong filing status label — Checking incorrect boxes, such as original or amended return, causes processing errors, misapplied payments, and delays in IRS account reconciliation for 2020 filings.
- Applying Pease limitations incorrectly — Misapplying wage limits or including non-taxable amounts can distort FUTA taxable wages, resulting in inaccurate liability and potential IRS corrections or penalties.
- Treating unemployment compensation as partially tax-free — Incorrectly excluding taxable wages or misclassifying reimbursements can understate FUTA liability, triggering IRS adjustments, penalties, or delayed processing of returns and accounts.
- Assuming a refund is still available — Assuming eligibility for 2020 FUTA refunds without checking deadlines may result in denied claims, as most refund windows have already closed.
- Missing or incorrect Social Security numbers — Incorrect SSNs cause mismatches in IRS records, delaying verification, triggering notices, and complicating the resolution of employment tax reporting and compliance issues.
- Unsigned return — An unsigned Form 940 is considered invalid, leading to rejection, delayed processing, and possible penalty assessment until a valid signature is provided.
Missing attachments — Omitting required schedules like Schedule A or amended return explanations results in incomplete filings, IRS correspondence, and extended processing times.
What is IRS Form 940 (2020) used for?
IRS Form 940 for 2020 is used by employers to report and reconcile their annual federal unemployment FUTA tax under the Federal Unemployment Tax Act, covering wages paid in 2020 to workers and determining additional federal employment taxes owed or overpaid.
Can I still file a 2020 Form 940?
Yes, employers can still file a FUTA tax return for unemployment in 2020. Filing late does not remove the obligation under federal law, and submitting helps stop failure-to-file penalties from increasing. Agricultural employers, household employees, and others should refer to IRS guidance for additional information.
Who is required to file Form 940?
Employers subject to federal unemployment FUTA tax generally must file if they pay wages under federal law, including for agricultural labor or domestic services in a private home. Household employees and domestic employees may be excluded, depending on state experience rate and worker thresholds.
What was the FUTA tax rate for 2020?
The annual FUTA tax rate for federal unemployment in 2020 was 6 percent, paid to the federal government on wages under $7,000. Employers may receive a maximum credit of 5.4 percent if state tax paid timely meets federal unemployment requirements.
What should I do if I owe additional tax for 2020?
If additional federal unemployment FUTA tax is owed, employers should file and pay promptly on behalf of workers. Payment rules vary by period, and balances must comply with Internal Revenue Service requirements to ensure compliance with federal employment taxes and avoid penalties or interest.
Can I amend a previously filed Form 940 for 2020?
Yes, employers may amend an unemployment FUTA tax return if errors occur under federal law. Corrections must reflect updated wages, tax paid, or credits, ensuring compliance with IRS rules for agricultural employers, domestic services, and related federal employment reporting requirements.
Where can I find additional help with Form 940 for 2020?
Additional information is available through the Internal Revenue Service website, including forms, tables, and the latest information on federal unemployment FUTA taxes. Employers can review guidance for household employees, agricultural labor, and domestic employees, or consult a tax professional for support.
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