Introduction to Form 940 and FUTA Tax
The Federal Unemployment Tax Act (FUTA) requires employers to pay a tax to fund state workforce agencies, which provide unemployment benefits to workers who have lost their jobs, the tax is reported on Form 940
Employers must file Form 940 annually to report their FUTA tax liability and make payments, the form is typically due by January 31st of each year, but the deadline may vary if the due date falls on a weekend or federal holiday
Where to File Form 940
Employers can file Form 940 electronically through the Electronic Federal Tax Payment System (EFTPS) or by mail, the IRS encourages electronic filing as it is faster and more secure
To file by mail, employers should send their completed Form 940 to the address listed in the instructions, which is usually the IRS address in Cincinnati, Ohio, or Ogden, Utah, depending on the employer's location
Making FUTA Tax Payments
Employers can make FUTA tax payments electronically through EFTPS or by phone, they can also make payments by check or money order if filing by mail
It is essential to make timely payments to avoid penalties and interest, employers should ensure they have sufficient funds in their account to cover the payment amount, and keep a record of the payment confirmation number
FUTA Tax Rates and Calculations
The FUTA tax rate is 6% of the first $7,000 in wages paid to each employee, however, employers who pay state unemployment taxes on time can receive a credit of up to 5.4%, reducing the effective FUTA tax rate to 0.6%
Employers must calculate their FUTA tax liability by multiplying the taxable wages by the applicable tax rate, and then subtracting any credits for state unemployment taxes paid
Common Mistakes to Avoid
Employers should be aware of common mistakes that can lead to penalties and delays, such as incorrect or incomplete information on Form 940, or failure to make timely payments
It is crucial to review the form carefully before submitting it, and to ensure that all payments are made on time, employers can also consult with a tax professional or the IRS for guidance on FUTA tax compliance
Frequently Asked Questions
What is the deadline for filing Form 940
The deadline for filing Form 940 is typically January 31st of each year, but may vary if the due date falls on a weekend or federal holiday
How do I make FUTA tax payments
You can make FUTA tax payments electronically through EFTPS, by phone, or by check or money order if filing by mail
What is the FUTA tax rate
The FUTA tax rate is 6% of the first $7,000 in wages paid to each employee, but can be reduced to 0.6% with a credit for state unemployment taxes paid
Can I file Form 940 electronically
Yes, you can file Form 940 electronically through the Electronic Federal Tax Payment System (EFTPS)
What happens if I miss the deadline for filing Form 940
If you miss the deadline, you may be subject to penalties and interest, so it is essential to file and pay on time
Where can I find more information on FUTA tax compliance
You can find more information on FUTA tax compliance on the IRS website, or by consulting with a tax professional