IRS Form 940 (2024): Employer’s Annual FUTA Return

IRS Form 940 is filed annually by employers to report and pay Federal Unemployment Tax Act (FUTA) obligations. This form funds state-administered unemployment compensation programs that support workers who have lost their jobs. Employers who meet the applicable FUTA filing tests are required to file this form each year.

Late Filers

Employers missing the January 31, 2025, deadline should file promptly to stop additional failure-to-file penalties from accruing on unpaid FUTA balances.

Multiple Income Sources

Employers paying wages in multiple states or credit reduction jurisdictions must complete Schedule A to accurately report all applicable FUTA obligations.

Itemizing Deductions

Employers may exclude certain benefits, including health insurance premiums and qualified retirement contributions, from taxable wages when calculating total FUTA liability.

Claiming 2024 Credits

Most employers qualify for a 5.4% FUTA credit if state unemployment taxes were paid timely on wages also subject to FUTA.

IRS Compliance

Filing Form 940 annually confirms that wage reporting, deposits, and credits comply with IRS requirements throughout the 2024 FUTA tax reporting period.

Citizens Abroad / Military

FUTA treatment for work performed abroad depends on employer status, employee citizenship, residency classification, and where services were physically performed.

Follow the steps below to complete your 2024 Form 940 accurately, and note that some steps reflect rules specific to this tax year that differ from prior filings.

1. Gather Your Documents Before Starting

Collect all payroll summaries, prior-year Form 940 copies, state unemployment tax payment records, and IRS business tax transcripts to confirm that reported wages and quarterly deposits are complete and accurate before beginning.

2. Choose the Correct Filing Status

Identify the correct type of return by checking the appropriate box at the top of Form 940. Options include amended, successor employer, no payments to employees in 2024, and final. If correcting a previously submitted return, check the "amended" box and complete all amounts that should have appeared on the original return, not only the fields that changed.

3. Report All Income on the Correct Lines

Enter the total payments made to all employees in 2024, then subtract exempt payments, such as employer-paid health insurance and qualified retirement contributions. Report only the first $7,000 of each employee’s wages as FUTA taxable wages on the appropriate lines when calculating the final taxable wage base and total FUTA liability.

4. Calculate Adjusted Gross Income (AGI)

Calculate your total FUTA tax by applying the 6.0% rate to taxable wages, then subtract the allowable credit for state unemployment taxes. Your net FUTA tax liability determines whether cumulative deposits made throughout 2024 were sufficient and whether a balance remains due with the return.

5. Choose Your Deductions and Apply Exemptions

Most employers apply the 5.4% credit to reduce the effective FUTA rate to 0.6%, provided state unemployment taxes were timely paid. California and New York employers must apply a 0.9% credit reduction, while U.S. Virgin Islands employers must apply a 4.2% reduction, increasing the effective FUTA tax rate beyond the standard net rate.

6. Claim the 2024-Specific Credit [2024 Only]

If state unemployment taxes were paid on time, claim the FUTA credit on the appropriate line. Attach Schedule A if operating in a credit reduction state to calculate any additional FUTA tax owed due to reduced credit eligibility.

Missing W-2s or Tax Records for 2024?

Late-filing employers may no longer have access to all original payroll records needed to complete Form 940 accurately. IRS business tax transcripts and Social Security Administration records can help reconstruct the information required to file a complete return.

IRS Wage & Income Transcript

This transcript shows income reported to the IRS for individual taxpayers; employers should use business tax transcripts instead when reconstructing payroll data for accurate FUTA reporting, compliance, and verification purposes.

IRS Account Transcript

This transcript shows filings, payments, penalties, and credits posted to an account, helping employers verify prior FUTA deposits, adjustments, and balances before accurately submitting Form 940 for compliance review purposes.

Social Security Administration

SSA wage records verify employee earnings reported through W-2 filings when payroll documents are missing or incomplete, helping employers reconstruct accurate wage histories for FUTA reporting and employment tax compliance.

Contact Prior Employers

Employers must retain payroll records for at least four years; prior payroll providers or co-employers may still be legally required or contractually obligated to supply supporting documentation upon formal request.

Filing late is better than not filing at all. Failure to file is 5% monthly; failure to pay is 0.5%. So file promptly.

The following errors are common causes of IRS delays, incomplete returns, or missed credits on Form 940 filings.

• Using the wrong tax year form — Filing a prior-year IRS Form 940 instead of the 2024 version causes IRS processing errors, delays, or potential return rejection.
• Missing Schedule M / 2024-specific credit — Employers in California, New York, or the U.S. Virgin Islands must attach Schedule A; omission leads to underreported FUTA and IRS notices.
• Wrong filing status label — Incorrect type of return selection, such as amended, final, or successor employer, can cause IRS misclassification or delay IRS processing.
• Applying Pease limitations incorrectly — Miscalculating FUTA taxable wages using incorrect wage base limits or exclusions results in inaccurate liability, potential IRS adjustments, and underpayment penalties.
• Treating unemployment compensation as partially tax-free — FUTA applies to employer-paid wages; misclassifying taxable versus exempt payments results in incorrect wage reporting and potential tax underpayment penalties and penalties imposed thereafter.
• Assuming a refund is still available — Refund eligibility generally expires after three years from filing or two years from payment; missing deadlines may forfeit recovery rights.
• Missing or incorrect Social Security numbers — Employee SSN errors create mismatches with IRS wage records, triggering notices, follow-up inquiries, or delayed processing and potential penalties from IRS review actions.
• Unsigned return — A Form 940 without an authorized signature is considered invalid and will not be processed until properly signed and resubmitted.
• Missing attachments — Required schedules such as Schedule A must be included when applicable; omission results in incomplete filings and IRS correspondence delays.

What is IRS Form 940 (2024) used for?

IRS Form 940 (2024) is used by employers to report and pay the employer’s annual Federal Unemployment Tax Act (FUTA) tax for the calendar year on wages paid. It helps fund federal and state unemployment programs that provide temporary benefits to eligible workers.

Can I still file a 2024 Form 940?

Yes, you can still file a 2024 Form 940 after the deadline. Filing late may result in penalties and interest, but submitting it promptly helps reduce further accruals and ensures the IRS receives accurate information about employer unemployment taxes for on-time processing.

Who is required to file Form 940?

Employers must file Form 940 if they meet the general, household, or agricultural tests. This includes paying at least $1,500 in wages in a calendar quarter or employing at least one worker in 20 different weeks during the calendar year, as required by law.

What is the FUTA tax rate for 2024?

The FUTA tax rate for 2024 is 6.0% on the first $7,000 of each employee’s wages. Employers may receive a maximum credit of 5.4% for state unemployment taxes paid on time, reducing the effective federal rate significantly under the current-law calendar-year rule.

Which states had FUTA credit reductions for 2024?

For 2024, FUTA credit reductions were applied to states with outstanding federal unemployment insurance loans. Employers in affected states receive a reduced maximum credit, increasing their effective FUTA tax rate and requiring Schedule A reporting with Form 940, as applicable.

How do I correct a mistake on a previously filed Form 940?

To correct a previously filed Form 940, file an amended return using the current form and check the amended box. Provide complete corrected figures, include an explanation of changes, and submit them to the IRS to ensure accurate unemployment tax reporting and proper corrections.

What happens if I owe FUTA tax but cannot pay in full?

If you owe FUTA tax but cannot pay in full, file Form 940 on time to avoid failure-to-file penalties. The IRS may charge interest and fees, but timely filing ensures compliance, while payment arrangements or partial payments may be considered later as required.

How long should I keep my Form 940 records?

Employers should keep Form 940 records for at least four years after the due date or payment date, whichever is later. Records include payroll data and supporting documents, ensuring compliance with IRS rules and allowing verification if questions arise during the review period.