IRS Form 940: FUTA Tax Return
Every employer paying $1,500+ in wages must file Form 940 annually to report and pay Federal Unemployment Tax (FUTA). Unfiled 940s can trigger TFRP exposure, business audits, and personal liability for the responsible officers. Don't let FUTA become the trigger for an IRS employment tax investigation.
FUTA Basics
FUTA Tax Rate
6.0% on the first $7,000 of wages per employee per year. Maximum FUTA per employee: $420.
State Credit
Employers get up to 5.4% credit for paying state unemployment tax (SUTA) — reducing the effective FUTA rate to 0.6%.
Credit Reduction States
States that borrowed from the federal unemployment trust and haven't repaid face a FUTA credit reduction — increasing the effective rate.
Filing Threshold
Must file Form 940 if you paid $1,500+ in wages in any calendar quarter, or had one or more employees for some part of a day in 20+ different weeks.
Due Date
January 31 of the following year. If all FUTA deposits were made on time, you get an extra 10 days (February 10).
Deposit Rules
FUTA tax is generally deposited quarterly if your liability exceeds $500. Use EFTPS for deposits.
What Happens If You Don't File or Pay FUTA
Unlike income tax withholding and FICA, FUTA is an employer-only tax — it is not withheld from employees. However, unpaid FUTA often surfaces during an employment tax audit alongside Form 941 issues. The TFRP (Trust Fund Recovery Penalty) does NOT apply to FUTA — the TFRP only covers the employee-withheld portion (income tax withholding + FICA). But the IRS can still assess the FUTA tax against the business, file liens, levy business assets, and in some cases pierce the corporate veil. The failure-to-file penalty is 5% per month (up to 25%), and failure-to-pay is 0.5% per month (up to 25%), plus interest.