Form 940: Annual Federal Unemployment Tax Reporting
What employers report on Form 940, how FUTA differs from payroll withholding, and when the annual return is due.
Purpose of Form 940
Form 940 reports an employer's annual Federal Unemployment Tax Act liability. FUTA is generally an employer-paid tax and is separate from federal income tax withholding and Social Security and Medicare taxes reported on Form 941.
FUTA calculation
The federal FUTA rate is applied to the first $7,000 of qualifying wages paid to each employee, subject to available state unemployment tax credits and special credit-reduction rules. Payments and employees excluded from FUTA treatment require fact-specific review.
Deposit and reconciliation controls
- Track FUTA taxable wages by employee.
- Monitor quarterly liability and deposit when the accumulated liability exceeds the applicable threshold.
- Reconcile Form 940 wages to payroll records and related employment tax filings.
- Check annually for credit-reduction states.
- Retain state unemployment contribution support.
Primary sources
This resource is provided for general educational purposes and does not constitute legal, tax, benefits, safety, or other professional advice. Requirements and individual circumstances vary. Confirm current rules with authoritative sources and qualified advisors.
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