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IRS Form 940 (2025): Employer’s Annual FUTA Return
Download, file, or correct your annual FUTA return for tax year 2025 — get the official form, review filing requirements, and resolve any outstanding issues with your return.
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What Is This Form
Employers file IRS Form 940 annually to report their Federal Unemployment Tax Act (FUTA) liability to the IRS. This form determines employers' contributions to the federal unemployment trust fund, which supports state unemployment benefit programs for eligible workers.
Late Filers
Employers who missed the original filing deadline can still submit Form 940, which prevents additional failure-to-file charges from accumulating on the unpaid balance.
Multiple Income Sources
Employers who paid wages across multiple states or business locations must consolidate all FUTA-taxable wages on a single Form 940 per IRS rules.
Itemizing Deductions
Form 940 does not use itemized deductions; instead, employers must identify exempt payments and wages exceeding the $7,000 FUTA wage base per employee.
Claiming 2025 Credits
Employers who paid state unemployment taxes on time and in full can claim a maximum credit to lower the federal rate to 0.6%.
IRS Compliance
Filing Form 940 accurately and on time keeps your business in good standing with the IRS, preventing penalties and corrective filings.
Citizens Abroad / Military
Citizens abroad may be subject to FUTA depending on employer status, while nonresident alien wages outside the U.S. are exempt under IRS rules.
Eligibility
Under the general test, employers must file Form 940 if they paid $1,500 or more in quarter 2024–2025 or had at least one employee working part-time for 20 or more weeks. Household and agricultural rules apply.
Late Filers
Employers who miss the Form 940 deadline should file promptly to avoid failure-to-file penalties and demonstrate good-faith compliance with the federal unemployment tax requirements.
Multiple Income Sources
Businesses across multiple states must report all FUTA-taxable wages on one Form 940 and attach Schedule A for the adjustment tax related to credit reduction.
Itemizing Deductions
Form 940 does not use itemized deductions; employers must identify exempt payments and exclude wages above the $7,000 FUTA wage base per employee limit.
Claiming 2025 Credits
Employers may claim up to 5.4% FUTA credit for 2025 if state unemployment taxes are paid in full on time, meeting federal requirements.
IRS Compliance
Form 940 must be filed accurately and on time to remain in IRS compliance, avoiding penalties, notices, or the required amended return process.
Citizens Abroad / Military
FUTA rules vary internationally: wages for U.S. citizens abroad may be taxable for American employers, while resident alien wages abroad are generally exempt.
Step-by-Step
Follow the steps below to complete your 2025 Form 940 accurately and completely, as tax year 2025 rules and schedules may differ from prior years.
1. Gather Your Documents Before Starting
Collect payroll summaries, state unemployment tax payment confirmations, prior-year Form 940 filings, and any IRS correspondence received during 2025. Verify total wages paid to all employees before you begin completing the return.
2. Choose the Correct Filing Status
Form 940 does not employ a personal filing status category. Before finalizing the return, verify the type of entity you are—sole proprietor, partnership, corporation, or other—as this determines the individual who is authorized to sign the return and the appropriate paper-filing address based on your location and whether payment is included.
3. Report All Income on the Correct Lines
Enter total payments made to all employees on Line 3, subtract exempt payments on Line 4, and subtract wages above the $7,000 wage base on Line 5. Line 6 shows a subtotal, Line 7 totals taxable FUTA wages, and Line 8 calculates FUTA tax before adjustments for 2025 filing accuracy requirements.
4. Calculate Adjusted Gross Income (AGI)
Form 940 calculates FUTA tax, not adjusted gross income. Multiply the 6.0% FUTA rate by taxable wages on Line 7, then apply eligible state unemployment credits and any credit reduction adjustments to determine the total FUTA tax after adjustments for accurate employer liability reporting.
5. Choose Your Deductions and Apply Exemptions
Determine all exempt payments that were made in 2025, such as wages paid to qualifying family members of sole proprietors, retirement contributions, and certain fringe benefits, and exclude them from the FUTA tax base. Accurately identifying exempt payments and above-wage-base amounts guarantees that you do not overpay or underpay federal unemployment taxes.
6. Claim the 2025-Specific Credit (2025 Only)
Employers who paid state unemployment taxes on time, in full, and on FUTA-taxable wages may claim up to a 5.4% credit against the 6.0% FUTA rate. Always attach Schedule A to calculate the reduced credit filing return.
Filing Deadline — February 2, 2026
The standard due date for the 2025 Form 940 is January 31, 2026, but since it falls on a weekend, the due date is extended to February 2, 2026. Employers who deposited FUTA taxes on time may file until February 10, 2026, without penalty.
Refund Deadline — May Be Limited
Employers may generally claim a refund within three years of the original filing date or within two years of the payment date, whichever is later. For a timely 2025 Form 940, the deadline is usually February 2, 2029, though exceptions may apply under IRS rules.
Processing Time — Allow Several Months
IRS processing times for Form 940 vary, but paper filings typically take six to eight weeks. Employers should wait before requesting transcripts and ensure any balance due is paid promptly to avoid additional interest accruing during IRS processing delays or reviews.
Deposit Requirements — Quarterly Thresholds Apply
FUTA deposits are necessary when the liability exceeds $500 in a quarter and are due by the end of the month following that quarter. Employers may either deposit the fourth-quarter liability or include it on Form 940 if it is less than $500.
Missing W-2s or Tax Records for 2025?
Employers who file late or correct prior returns may lack payroll records. IRS transcripts and Social Security Administration data may help, but IRS guidance states employers are responsible for maintaining accurate employment tax records at all times.
IRS Wage & Income Transcript
An IRS wage & income transcript is an individual tool that shows wages reported on Forms W-2 and other information returns, primarily used by individuals, not employers, for payroll reconstruction purposes.
IRS Account Transcript
An IRS account transcript shows prior payments, deposits, penalties, and IRS adjustments for an employer account, providing a summary record of reported tax activity for a specific tax period.
Social Security Administration
SSA records may be useful in limited cases, but the IRS requires employers to maintain their employment tax records for at least 4 years rather than relying on SSA data.
Contact Prior Employers
IRS rules require employers to keep employment tax records for four years; if records are missing, contacting prior payroll providers or processors may help recover documentation needed for accurate reporting.
Filing late is better than not filing at all. Failure-to-file penalties are higher than failure-to-pay, making timely submission the most important step.
Missing W-2s or Tax Records?
You can still complete your return even without original records
Penalties and interest on any unpaid 2025 FUTA balance have been accruing since the original filing deadline. Submitting Form 940 now immediately stops the failure-to-file penalty from continuing to increase.
Failure-to-File Penalty
(5% per month, up to 25%)
Employers who fail to file Form 940 by the due date are charged 5% of the unpaid tax per month or partial month. The penalty accrues up to 25% total and increases the longer the return remains unfiled.
Failure-to-Pay Penalty
(0.5% per month + interest)
FUT nonpayment incurs a 0.5% monthly penalty. Taxes continue until paid. The payment penalty offset reduces the failure-to-file penalty when both penalties apply. Interest also accrues on the outstanding amount.
Penalty Abatement Options
(First-Time Abatement & Reasonable Cause)
Employers with a clean compliance history may qualify for first-time abatement, which removes penalties for one tax period. Documenting and explaining circumstances beyond your control to the IRS may also entitle you to reasonable cause relief.
Late filing is better than none. Due to the higher failure-to-file rate than the failure-to-pay rate, submitting your return, even without full payment, significantly reduces IRS penalty liability.
The errors below are among the most frequent causes of IRS processing issues, notices, or missed credits on Form 940 filings.
- Using the wrong tax year form — Submitting a prior-year Form 940 for 2025 wages causes processing delays, calculation errors, or rejection; always use the correct 2025 version.
- Missing Schedule M / 2025-specific credit — Employers in credit reduction states must attach required schedules; missing them results in incorrect FUTA credit calculations and potential underpayment notices from the IRS.
- Wrong filing status label — Using an incorrect filing status or entity classification on Form 940 can lead to IRS mismatches, delays, and potential account processing errors.
- Applying Pease limitations incorrectly — Misapplying limitation rules when calculating credits or adjustments can distort FUTA liability, resulting in inaccurate tax reporting and possible IRS correction notices.
- Treating unemployment compensation as partially tax-free — Incorrectly treating certain wages or unemployment-related payments as exempt may reduce taxable wages improperly and cause underpayment or audit adjustments later.
- Assuming a refund is still available — Assuming refunds are always available may lead to missed deadlines, since FUTA overpayments are subject to strict IRS statute of limitations rules.
- Missing or incorrect Social Security numbers — Missing or incorrect Social Security numbers on payroll records can cause IRS mismatches, delayed processing, and notices requiring correction or verification.
- Unsigned return — An unsigned Form 940 is invalid and will not be processed by the IRS, causing rejection and requiring resubmission with proper authorization.
- Missing attachments — Missing required attachments, such as Schedule A or Schedule R, can result in incorrect tax calculations, processing delays, or IRS rejection of the return.
What is IRS Form 940 (2025) used for?
Employers use IRS Form 940 (2025) to report the employer’s annual federal unemployment tax liability to the federal government for the calendar year. It funds unemployment insurance under Title XII and is separate from federal income tax withheld from employees.
Can I still file a 2025 tax return?
As long as the final deadline has passed, employers may continue to submit the 2025 Form 940. It is not possible to increase the penalty for failing to file by filing late; however, interest will continue to accrue until the total federal tax is paid.
Who is required to file Form 940?
Most employers must file Form 940 if they meet federal unemployment insurance requirements during the calendar year, including paying wages or having at least some part of 20 weeks of employment. Household and agricultural employees follow separate filing rules under IRS law.
What are credit reduction states, and how do they affect my return?
Credit reduction states are those under Title XII of the federal unemployment system in which loans remain unpaid, reducing the FUTA tax credit and increasing liability. Employers pay a higher tax for the given year and must complete the reduction schedule when required.
What happens if I miss a required FUTA deposit?
If you miss required FUTA deposits, the IRS may assess penalties and interest for late payment. Employers continue to accrue charges until the full amount is repaid, depending on timing across consecutive years and federal government enforcement rules for unemployment tax compliance.
Can I file Form 940 electronically?
Yes, Form 940 can be submitted electronically through authorized IRS systems in the United States. To ensure accurate unemployment insurance reporting for each taxable year and proper federal tax compliance, nonprofit organizations and eligible employers must comply with e-filing regulations.
How do I correct a previously filed Form 940?
To correct Form 940, file an amended return using the correct tax year form, attach required schedules, and follow IRS instructions. This ensures accurate federal tax reporting and maintains compliance with employer filing obligations and unemployment insurance requirements across consecutive years.
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