What IRS Form 940 (2020) Is For

Form 940 is used to report your annual Federal Unemployment Tax Act (FUTA) tax, which helps fund unemployment compensation for workers who have lost their jobs (IRS Instructions for Form 940 (2020)). Employers who paid wages of $1,500 or more in any quarter during 2019 or 2020, or who had one or more employees for at least part of a day in 20+ different weeks during either year, must file this form.

When You'd Use Form 940 for 2020 (Late or Amended Filing)

You would file Form 940 for 2020 now if you never filed your original return (which was due February 1, 2021), received IRS notices about missing returns, or need to correct a previously filed 2020 return. Late filing typically occurs when taxpayers discover unfiled employment tax obligations through IRS correspondence, compliance actions, or when calculating penalties and interest on outstanding FUTA tax balances. You might also file an amended return to claim credits for state unemployment taxes paid after the original due date or to correct wage reporting errors (IRS Instructions for Form 940 (2020)).

Key Rules Specific to 2020

For 2020, the U.S. Virgin Islands was the only credit reduction state, meaning employers who paid wages subject to USVI unemployment laws faced reduced federal credits and higher FUTA tax liability (IRS Instructions for Form 940 (2020)). The FUTA tax rate was 6.0% on the first $7,000 of each employee's wages, with employers typically receiving a 5.4% credit for timely state unemployment tax payments, resulting in a net 0.6% federal rate. The 2020 form was also the first to fully implement changes from the Tax Cuts and Jobs Act, making moving expense and bicycle commuting reimbursements subject to FUTA tax.

Step-by-Step (High Level)

• Gather your records: Obtain wage records, state unemployment tax payment documentation, and any prior-year tax account transcripts from the IRS
  
  
• Use the correct form: Complete the actual 2020 Form 940 (not a current-year form) and check the "amended return" box if correcting a previously filed return
  
  
• Complete required schedules: Attach Schedule A (Form 940) if you're a multi-state employer or subject to credit reduction
  
  
• Include explanations: For amended returns, attach a written explanation of changes being made
  
  
• Choose filing method: Mail paper returns to the "without payment" address even if including payment; electronic filing may be available through tax professionals
  
  
• Keep copies: Maintain copies of all filed forms and supporting documentation for your records (IRS Instructions for Form 940 (2020))
  
  

Common Mistakes and How to Avoid Them

• Using wrong year's form: Always use the 2020 Form 940 to file or amend 2020 returns, not current-year forms
  
  
• Incorrect wage calculations: Include all compensation subject to FUTA, including bonuses, vacation pay, and certain fringe benefits, but exclude payments over $7,000 per employee
  
  
• Missing state tax credits: Ensure you claim proper credits for state unemployment taxes paid, but remember credits are reduced if state taxes weren't paid timely
  
  
• Wrong filing address: Use the "without payment" mailing address for amended returns, even when including payment with the return
  
  
• Incomplete Schedule A: Multi-state employers or those subject to credit reduction must complete and attach Schedule A (Form 940)
  
  
• Missing required signatures: Both original and amended returns must be signed to be considered valid for processing (IRS Instructions for Form 940 (2020))
  
  

What Happens After You File

The IRS typically processes Form 940 within 6-8 weeks, though amended returns may take longer. You'll receive notices if additional information is needed or if there are discrepancies in your filing. If you owe additional tax, you can pay by check, electronic funds transfer, or set up an installment agreement online if you owe $25,000 or less and can pay within 24 months (IRS Instructions for Form 940 (2020)). Penalties and interest continue to accrue on unpaid balances until paid in full. If you disagree with IRS adjustments, you have appeal rights and can request penalty abatement using Form 843 if you have reasonable cause for late filing or payment.

FAQs

Can I still get refunds for overpaid FUTA tax from 2020?

Generally, you have three years from the return due date to claim refunds, so 2020 refund claims would typically need to be filed by February 1, 2024, though specific circumstances may extend this deadline.

What penalties apply to late-filed 2020 Form 940?

Late filing and payment penalties are charged at rates set by law, with additional interest accruing from the original due date. Use Form 843 to request penalty abatement if you have reasonable cause (IRS Instructions for Form 940 (2020)).

Do I need tax account transcripts before filing?

While not required, obtaining transcripts helps verify what the IRS has on file and can prevent processing delays, especially for amended returns or when significant time has passed.

Should I file amended state unemployment returns too?

Contact your state unemployment agency to determine if amended state returns are needed when your federal Form 940 corrections affect state-reported wages or tax calculations.

Can I e-file a late or amended 2020 Form 940?

Amended returns must be filed on paper, even if the original was e-filed. Late original returns may be e-filed through tax professionals if electronic filing systems still accept 2020 forms (IRS Instructions for Form 940 (2020)).

What if I can't pay the full amount owed?

You can apply for an online installment agreement if you owe $25,000 or less and can pay within 24 months, though fees, penalties, and interest will continue until paid in full (IRS Instructions for Form 940 (2020)).

How long should I keep 2020 Form 940 records?

Maintain all employment tax records for at least four years after the tax becomes due or is paid, whichever is later, to support your return if questioned by the IRS.

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