Filing the unfiled 2023 Form 940 is an essential obligation for employers under the Federal Unemployment Tax Act. This tax form reports the federal unemployment tax supporting nationwide unemployment compensation programs. When employers pay FUTA tax, they help fund unemployment benefits, which are critical for workers who lose their jobs. Late filing of tax forms often creates additional stress for small businesses, as penalties and interest increase the total FUTA tax liability.

The federal unemployment tax works in coordination with state unemployment tax systems. Employers must file Form 940 if they had one or more employees, paid wages above the required threshold, or employed farm workers or household employees. Filing is also necessary if a business acted as a successor employer, stopped paying wages during the year, or employed temporary employees. Employers should review wages paid, payroll tax deposits, and FUTA-exempt payments such as certain fringe benefits or group term life insurance. Understanding the connection between state and federal unemployment tax helps businesses manage liabilities more accurately.

This guide provides step-by-step instructions for filing, explains how to calculate total payments, and outlines ways to avoid penalties. Employers remain compliant with the Internal Revenue Service when they track calendar quarter deposits, review employer identification number accuracy, and confirm tax return details. Knowledge of tax forms and FUTA rules will give employers more confidence in meeting deadlines and managing payroll tax responsibilities.

Unfiled 2023 Form 940

Many employers discover late that they failed to submit the required tax return for the prior year. An unfiled 2023 Form 940 signals noncompliance with the Federal Unemployment Tax Act, which funds unemployment compensation through federal unemployment tax collections. Small businesses with one or more employees, those paying cash wages to farm workers, or households employing domestic workers must file Form 940. Employers who delay filing increase their total FUTA tax liability. Penalties and interest continue to compound until the return is received. The Internal Revenue Service reviews tax forms for accuracy, making it essential to ensure all information, including the employer identification number and business name, is correct.

• Filing is required when employee wages in a calendar quarter exceed $1,500.
  
  
• Agricultural employers must file a claim if cash wages of $20,000 or more were paid to farm workers.
  
  
• Household employees create a filing requirement when wage thresholds are met within the year.
  
  
• A successor employer assumes responsibility for the FUTA tax return when taking over operations.
  
  
• Employers must include temporary employees and part-time staff when calculating total payments.

Late filing does not erase the obligation, and employers must still submit the form even after the deadline. The tax return also requires employers to reconcile payroll tax records with state unemployment systems to confirm state unemployment tax credits. Inaccurate records create risks of mismatched information that may delay processing or trigger additional review. Maintaining correct tax forms helps demonstrate compliance and protects against collection activity.

• Employers should confirm total FUTA tax calculations, accounting for FUTA-exempt payments such as fringe benefits.
  
  
• Correct filing ensures employees’ wages are reported correctly in the Unemployment Tax Act FUTA.
  
  
• Submitting the return with accurate trade name and EIN details avoids complications.
  
  
• Reviewing prior quarterly payment deposits ensures the final return balances.
  
  
• Attaching schedules when required supports compliance for multi-state employer reporting.

Unfiled tax returns create escalating financial consequences, yet accurate completion reduces long-term exposure. Filing late still demonstrates good faith, which supports potential relief requests—employers who take action gain clarity on tax liability and prevent further complications with the Internal Revenue Service.

Federal Unemployment Tax Act

The federal unemployment tax act, FUTA, was established to provide funds for unemployment compensation programs. Employers who pay FUTA tax contribute to the federal government’s efforts to support workers during job loss. Unlike FICA taxes covering Social Security and Medicare, the federal unemployment tax works with state unemployment systems to ensure benefits remain available. 

The Internal Revenue Service enforces these obligations through Form 940, which most employers must file annually to report FUTA tax liability. Understanding the role of the Unemployment Tax Act is essential for employers seeking to comply with federal and state requirements.

Purpose of the Federal Unemployment Tax Act

• The act ensures that unemployment benefits remain available when employees lose work.
  
  
• Employers provide funds through tax payments on wages paid to eligible workers.
  
  
• Federal unemployment tax revenue supplements state unemployment tax collections.
  
  
• The program helps stabilize the labor market during economic downturns.

Relationship with State Unemployment Tax

• Employers receive credit against FUTA tax liability for timely state unemployment tax payments.
  
  
• State unemployment systems track employee wages to calculate required contributions.
  
  
• Credit reduction occurs when a state does not repay federal unemployment loans.
  
  
• A credit reduction state increases the employer’s total FUTA tax return obligation.

Employer Filing Requirements Under FUTA

• Employers must file Form 940 when they pay wages above threshold amounts in a calendar quarter.
  
  
• Household employers and farm workers may trigger filing based on specific wage rules.
  
  
• Multi-state employer reporting requires attaching Schedule A when filing.
  
  
• A successor employer assumes responsibility for filing after a transfer of business.

The Federal Unemployment Tax Act provides a clear framework for employers' contributions to unemployment programs. When employers understand the purpose of FUTA, its relationship with state unemployment systems, and the conditions for filing, they reduce errors in their tax forms. Strong knowledge of these obligations protects businesses from penalties and ensures they meet the responsibilities outlined by the Internal Revenue Service.

FUTA Tax Liability

Employers are responsible for calculating FUTA tax liability each year to determine the proper amount owed on their tax return. The federal unemployment tax applies to the first $7,000 of wages paid to each employee, though credits for state unemployment tax reduce the effective rate. Understanding what is taxable and what qualifies as FUTA-exempt payments ensures accuracy. Exclusions such as fringe benefits, group term life insurance, and specific employer contributions simplify reporting obligations. Correct identification of wages, exemptions, and credits protects small businesses from paying more than required and demonstrates compliance with the Federal Unemployment Tax Act FUTA.

Components of FUTA Taxable and Exempt Payments

1. Employee Wages

• Taxable under FUTA: Employee’s wages up to $7,000
• Exempt: None

2. Employer Contributions to Fringe Benefits

• Taxable under FUTA: None
• Exempt: Yes

3. Group Term Life Insurance

• Taxable under FUTA: None
• Exempt: Yes

4. Employer Portion of FICA Taxes

• Taxable under FUTA: None
• Exempt: Yes

5. Payments to Independent Contractors

• Taxable under FUTA: None
• Exempt: Yes

6. Certain Cash Wages to Household Employees

• Taxable under FUTA: Yes, if wage thresholds are met
• Exempt: None

Employers must review total payments to confirm which portions remain subject to FUTA. An employee’s wages up to the $7,000 limit form the foundation of the calculation. Exclusions lower the base, and then credits for state unemployment tax reduce the FUTA rate from 6.0 percent to as low as 0.6 percent for most employers. Employers in a credit reduction state face higher tax liability because credits are reduced.

Employers who complete calculations carefully ensure the total FUTA tax recorded on the tax return reflects accurate liabilities. Tracking wages paid each calendar quarter and reconciling deposits against state unemployment systems keeps records consistent. When businesses pay FUTA tax correctly, they avoid penalties and maintain compliance with the Internal Revenue Service. Strong recordkeeping practices improve efficiency during filing and provide reliable documentation if questions arise later.

Credit Reduction

A credit reduction occurs when a state fails to repay federal unemployment loans, which increases the FUTA tax liability for employers in that state. The federal government requires repayment on schedule, and when a state does not meet the obligation, the Internal Revenue Service applies a reduced credit. Employers in a credit reduction state must calculate additional liability on their tax return, directly raising the total FUTA tax owed. This adjustment can significantly affect reporting for small businesses and multi-state employers.

• Definition: A credit reduction decreases the standard FUTA credit, which results in a higher tax rate on wages paid.
  
  
• Impact on Employers: Businesses in affected states pay more federal unemployment tax, which increases payroll tax expenses and complicates quarterly payment planning.
  
  
• Example Calculation: An employer normally taxed at 0.6 percent after credits may see the effective rate increase due to credit reduction adjustments.
  
  
• IRS Reporting Requirements: Employers with operations in multiple states must file Schedule A with Form 940 to correctly allocate wages and calculate FUTA liability.
  
  
• Compliance Practices: Employers should review the Internal Revenue Service’s annual list of credit reduction states to anticipate adjustments and prepare accurate tax forms.

Employers who understand the mechanics of credit reduction can plan financial strategies. Careful recordkeeping of wages paid and state unemployment tax contributions reduces the risk of underpayment. When businesses align their payroll tax practices with Internal Revenue Service requirements, they strengthen compliance and prevent costly mistakes.

Federal Unemployment Tax

The federal unemployment tax provides a national framework for funding unemployment compensation programs that stabilize the workforce. Employers who must file Form 940 report their obligations under the Federal Unemployment Tax Act (FUTA), which applies to employee wages. Although state unemployment tax systems are responsible for paying unemployment benefits, the federal unemployment tax ensures consistent funding and coordination between states. Every employer with one or more employees should recognize how the federal government structures this tax and how it integrates with payroll tax requirements.

Purpose of the Federal Unemployment Tax

The federal unemployment tax serves as a safeguard for workers who experience job loss. Employers pay FUTA tax to the Internal Revenue Service, and these funds are later allocated to support state programs that provide unemployment benefits. The act requires employers to calculate tax liability based on wages paid, with a cap applied to the first $7,000 of each employee’s wages. This arrangement helps distribute financial responsibility fairly among most employers while protecting the economic stability of state unemployment systems.

Employer Credits for State Contributions

Employers receive credits for state unemployment tax payments, reducing federal unemployment tax liability. This credit often lowers the effective FUTA rate from six percent to as little as 0.6 percent. Employers must ensure timely state unemployment tax payments to qualify for the credit, since late deposits may disqualify a portion of the reduction. Understanding this interaction between federal and state unemployment tax obligations helps small businesses maintain accurate tax returns and avoid underpayment penalties.

Employers who fully understand how the federal unemployment tax operates benefit from more precise payroll management and improved compliance. Clear awareness of credit interaction, wage base limits, and filing obligations protects against unnecessary costs. Strong knowledge of FUTA requirements ensures employers can confidently manage liabilities while meeting their responsibilities to the Internal Revenue Service and their employees.

Due Date and Filing Options

The due date for filing Form 940 is set annually to align with federal unemployment tax reporting requirements. Employers must submit the tax return for wages paid during the prior calendar year no later than January 31. When all tax payments are made on time, the Internal Revenue Service allows an extended filing deadline of February 10. Employers who delay filing increase their FUTA tax liability, as penalties and interest accumulate until the tax return is received. Clear awareness of due dates ensures small businesses avoid unnecessary expenses.

Filing Methods Available

• Electronic filing allows employers to transmit tax forms securely, reducing processing delays and errors.
  
  
• Paper filing remains an option for employers who prefer traditional methods, although mailing increases the risk of slower confirmation.
  
  
• Before filing, employers must confirm financial institution deposits to ensure that reported FUTA tax liability matches wage and payment records.

Filing Special Situations

• When employers discover errors or changes after the original due date, an amended return filing is required.
  
  
• Successor employer reporting applies when businesses transfer operations and assume responsibility for federal unemployment tax obligations.
  
  
• Household and farm workers trigger special filing rules based on cash wages and thresholds that differ from those of standard employees.

Employers who understand filing deadlines and choose the appropriate filing option demonstrate compliance with the Unemployment Tax Act FUTA. Careful preparation of tax forms, combined with accurate payroll records, prevents miscalculations. Meeting deadlines protects businesses from penalties, while proper filing methods ensure the Internal Revenue Service processes returns efficiently and consistently.

Aggregate Form Requirements

• Who Files: Aggregate Form 940 reporting applies to Certified Professional Employer Organizations and section 3504 agents that handle employment taxes for multiple businesses. These entities combine unemployment taxes for several employers into one tax return, ensuring accurate payment of federal unemployment tax on behalf of clients.
• Schedule R: Employers who fall under aggregate filing rules must complete Schedule R, which allocates wages paid and tax liability among each client. This schedule ensures that the Internal Revenue Service can track contributions properly and reconcile total payments with each employer’s account.
• Successor Employer Rules: A business taking over operations from another company becomes responsible for unemployment taxes as a successor employer. In these cases, accurate completion of the aggregate form ensures that liabilities transition correctly and prevent gaps in unemployment compensation funding.
• Documentation Requirements: Organizations filing aggregate returns must maintain records for every employer covered, including total FUTA tax reported, wages paid, and amounts allocated. Records should also confirm that payments were made through financial institutions as required. Proper documentation protects against disputes during IRS reviews.

Employers using aggregate filing benefit from streamlined reporting, but must remain diligent in recordkeeping to maintain compliance with the Unemployment Tax Act FUTA. A clear understanding of allocation procedures, employer identification number accuracy, and Schedule R requirements ensures a smoother submission. When employers meet these standards, they reduce the risk of penalties while fulfilling responsibilities to the federal government and employees.

Calculating Your FUTA Tax Liability

Employers must calculate FUTA tax liability accurately to avoid errors on the tax return and prevent penalties. The process involves reviewing wages, excluding FUTA-exempt payments, applying the correct rates, and confirming liability through proper recordkeeping. Every employer subject to the Federal Unemployment Tax Act (FUTA) should follow clear, structured steps to ensure compliance with the Internal Revenue Service.

Step 1: Identify Total Payments

Employers must review total payments made to employees throughout the year. Under FUTA, only the first $7,000 of each employee’s wages are taxable. Employers should also include temporary employees and seasonal workers when calculating amounts.

Step 2: Subtract Exempt Payments

Certain items, such as fringe benefits, group term life insurance, and the employer portion of FICA taxes, are FUTA-exempt payments. Subtracting these amounts ensures that FUTA liability only applies to eligible wages.

Step 3: Apply the FUTA Tax Rate

The standard FUTA rate is six percent on the first $7,000 of employee wages. Employers who made timely state unemployment tax payments generally receive a credit that reduces the effective rate to 0.6 percent.

Step 4: Adjust for Credit Reduction State Status

The available credit decreases if an employer operates in a credit reduction state. This adjustment increases total FUTA tax liability and must be calculated using Schedule A of Form 940.

Step 5: Confirm Accuracy and Record Liability

Employers must confirm all figures and reconcile quarterly payment records with financial institution deposits. Accurate calculation ensures that the total FUTA tax reported on the tax return matches payments made throughout each calendar quarter.

Employers who follow these structured steps maintain compliance with federal unemployment tax rules and prevent underpayment issues. Careful tracking of wages paid, confirmation of exemptions, and timely state unemployment tax contributions improve accuracy. Strong practices in calculating FUTA liability protect small businesses from unnecessary expenses and strengthen compliance with federal and state unemployment systems.

Avoid Penalties

Employers who fail to file Form 940 or make timely tax payments face significant financial consequences. The Internal Revenue Service enforces compliance under the Unemployment Tax Act (FUTA) to maintain funds for unemployment compensation. When employers delay filing or underpay federal unemployment tax, penalties and interest rapidly increase the total liability. Understanding how these charges work allows businesses to anticipate obligations and avoid mistakes that affect payroll tax management.

• Failure to file the FUTA tax return results in a penalty equal to five percent of the unpaid tax for every month the return is late, up to a maximum of twenty-five percent.
  
  
• The IRS imposes an additional charge for late deposits, with rates ranging from two percent to fifteen percent depending on the delay, as outlined in IRS guidance on the penalty for failure to deposit.
  
  
• Interest accumulates daily on unpaid balances, compounding over time and raising the overall cost. The IRS explains how these charges are calculated in its section on interest.
  
  
• Errors on tax forms, such as missing an employer identification number or omitting required schedules, can extend review time and lead to penalties.
  
  
• Employers who stop paying wages yet fail to mark a return as final may continue to incur unnecessary assessments.

Employers who stay informed about penalty structures can build safeguards into payroll systems. Accurate records of wages paid, reconciled state unemployment tax deposits, and consistent use of financial institutions help maintain compliance.

• Regularly reviewing payroll records ensures the total FUTA tax liability is correctly reported.
  
  
• Confirming that tax forms include the complete business name and EIN prevents filing delays.
  
  
• Keeping quarterly payment schedules organized lowers the risk of missed deadlines.
  
  
• Monitoring IRS notices and responding promptly reduces the chance of enforcement escalation.
  
  
• Using amended return filings properly corrects prior mistakes without compounding penalties.

Employers who remain diligent about filing accuracy and timely deposits protect themselves from costly outcomes. Proactive compliance with FUTA rules demonstrates responsibility, improves payroll reliability, and prevents long-term disruptions in meeting obligations to the Internal Revenue Service.

Resolution Options and Temporary Relief

Employers who cannot fully pay their FUTA tax liability when filing still have structured options through the Internal Revenue Service. The federal unemployment tax act allows businesses to remain compliant while arranging payment solutions that fit financial circumstances. Exploring installment agreements, penalty relief programs, and temporary collection delays can ease the pressure of tax debt. Employers should evaluate each path carefully to determine which program aligns with their ability to manage unemployment taxes without jeopardizing essential business operations.

Installment Agreements for Businesses

• Short-term agreements provide up to 120 days to pay FUTA tax liability fully.
  
  
• Long-term installment agreements allow monthly payments spread across multiple years, depending on the balance owed.
  
  
• Employers must remain current with all future tax forms and deposits to keep agreements valid.
  
  
• The Internal Revenue Service reviews each application, confirming the ability to pay through income and expense data.

Penalty Abatement Programs

• First Time Abate may remove penalties when a business has a clean compliance history.
  
  
• Reasonable cause relief applies if circumstances such as natural disasters or illness prevented timely filing.
  
  
• Requests for abatement require clear documentation, including payroll records and proof of hardship.
  
  
• Employers should address all unpaid FUTA tax before requesting an abatement, as unresolved balances may affect eligibility.

Temporary Collection Delay

• Employers facing severe hardship may qualify for currently not collectible (CNC) status.
  
  
• CNC status delays collection activity when financial documentation proves that basic living or operating costs cannot be met.
  
  
• The Internal Revenue Service explains how to request this relief in its section on temporarily delaying the collection process.
  
  
• Interest and penalties continue to accrue during CNC, but active enforcement is suspended while the status remains in place.

Employers who explore these resolution options demonstrate good faith while managing FUTA obligations. Careful review of installment agreements, abatement possibilities, and CNC relief ensures businesses select the most realistic approach. Proactive planning protects long-term stability and reinforces compliance with federal unemployment tax rules.

Frequently Asked Questions

What happens if I discover an unfiled Form 940 after the deadline?

Employers must still file the required IRS form even if the deadline has passed. Submitting late demonstrates good faith compliance, which can reduce further enforcement actions. The Internal Revenue Service calculates penalties from the original due date, but interest stops increasing once the return is filed and the tax liability is paid. Visiting the IRS website provides current filing instructions and updates on penalties associated with late FUTA tax returns.

Do I need to file if I had at least one employee for part of the year?

Yes, employers with at least one employee for any part of a day in twenty or more weeks must file Form 940. Wages paid in a calendar quarter exceeding $1,500 also trigger filing requirements. This standard applies even if the total staff is limited to temporary or part-time workers. Employers should maintain accurate payroll records and confirm filing thresholds through the IRS website before preparing tax forms.

Can I file Form 940 electronically through the IRS website?

Employers may file the IRS form electronically through authorized providers linked on the IRS website. Electronic filing ensures faster processing, reduces clerical errors, and provides immediate confirmation of submission. Paper filing remains an option, but electronic filing aligns with best practices for accuracy and efficiency. Employers must confirm that the reported amounts match payroll tax deposits to avoid delays or additional inquiries from the Internal Revenue Service during review.

What if my business operates in more than one state?

Employers paying wages in multiple states must attach Schedule A when filing Form 940. This schedule allocates wages among different state unemployment tax systems, ensuring credits are correctly applied. Filing without this schedule creates discrepancies that may delay processing or trigger audits. Employers should confirm wage details before filing to avoid underreporting liability. Guidance on completing multi-state schedules is available on the IRS website.

How significant is the employer identification number EIN on Form 940?

The employer identification number EIN is critical for ensuring accurate processing of any IRS form, including Form 940. An incorrect or missing EIN delays acceptance and may increase penalties if processing is extended. Employers must ensure the EIN listed matches the information provided when applying to the Internal Revenue Service. Correct use of the EIN connects payroll tax records, tax forms, and financial institution deposits, giving consistency across reporting systems.

Can unpaid liability carry into the next quarter?

Yes, unpaid FUTA tax liability carries forward, increasing penalties and interest until satisfied. The Internal Revenue Service applies additional charges when amounts remain outstanding into the next quarter, especially if quarterly payment schedules are missed. Employers should reconcile deposits promptly to prevent compounding costs. Reviewing instructions on the IRS website helps confirm deposit deadlines and reporting due dates to avoid extended liabilities across calendar quarters.

Do successor employers need to file their own Form 940?

A successor employer must file a separate IRS form if it acquires a business and assumes responsibility for payroll tax obligations. The transfer includes reporting wages paid and unemployment tax liability for employees continuing under the new ownership. The Internal Revenue Service requires careful documentation during these transitions. Employers must verify the employer identification number EIN on the form to ensure accurate filing and compliance with federal requirements.