Form 940 is an annual tax form used by employers in the United States to report their Federal Unemployment Tax Act (FUTA) tax liability. The FUTA tax provides funds for paying unemployment compensation to workers who have lost their jobs. Employers are generally responsible for paying FUTA taxes; employees do not have any amount withheld from their wages for this tax.
Key Points About Form 940:
- Who Must File: Employers who paid wages of $1,500 or more in any calendar quarter or had at least one employee working on at least one day in 20 or more different weeks during the year must file Form 940.
- Due Date: The form is due by January 31st of the year following the tax year being reported. However, if the FUTA tax has been paid in full throughout the year, the due date is extended to February 10th.
- Filing Frequency: Form 940 is filed annually.
- Tax Rate: The standard FUTA tax rate is 6.0% on the first $7,000 paid to each employee annually. However, employers may receive a credit of up to 5.4% if they pay state unemployment taxes, reducing the effective FUTA tax rate to 0.6%.
- Purpose: The tax collected is used to fund the federal unemployment trust fund, which provides unemployment compensation to workers who have lost their jobs.
Filing Form 940 ensures that employers are compliant with federal unemployment tax requirements and contributes to the overall system of unemployment benefits.
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