As a business owner, navigating tax forms can feel overwhelming. One crucial form for employers is Form 940, the Employer’s Annual Federal Unemployment (FUTA) Tax Return. This form is used to report your annual FUTA tax liability. Understanding not only what Form 940 is but also Where Do I Send The 940 Form is essential for compliance and avoiding penalties. This guide will provide you with a comprehensive overview of Form 940 and clearly explain the filing process, including where to send it, ensuring you meet your tax obligations accurately and on time.
Understanding Form 940: The Basics
Form 940, officially titled “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” is an IRS form used to report and pay FUTA tax. FUTA tax is a federal tax employers pay to fund state unemployment agencies. It’s important to note that FUTA tax is paid by the employer, not deducted from employee wages, unlike taxes such as Medicare or Social Security.
The FUTA tax rate is generally 6.0% on the first $7,000 paid to each employee during the calendar year. However, due to the FUTA tax credit, many employers end up paying a significantly lower rate, often around 0.6%. This credit is dependent on individual state unemployment tax laws and whether your state is under credit reduction.
It’s crucial to distinguish Form 940 from Form 941, the “Employer’s Quarterly Federal Tax Return.” Form 941 is used to report quarterly payroll taxes such as Social Security, Medicare, and federal income tax withholdings. Form 940, on the other hand, is an annual form specifically for FUTA tax.
For detailed information on FUTA tax and payments, refer to the IRS guidelines and resources dedicated to FUTA.
Who Needs to File Form 940?
You are required to file Form 940 if either of the following conditions are met during the calendar year:
- You paid wages of $1,500 or more to employees.
- You employed at least one person for some part of a day in any 20 or more different weeks within the calendar year. This includes full-time, part-time, and temporary employees.
It’s important to note that these criteria are based on employee wages. If you exclusively work with independent contractors, you are not obligated to file Form 940 for their payments. Instead, payments to contractors are typically reported using Form 1099-NEC.
Form 940 Deadline: When is it Due?
While FUTA tax payments are typically made quarterly, Form 940 is an annual filing. The standard due date for Form 940 is January 31st of the year following the calendar year for which you are reporting. For example, the Form 940 for 2024 is due on January 31, 2025.
However, the IRS provides a grace period: if you have deposited all your FUTA tax liabilities on time throughout the year, you are granted an extension until February 10th. This ten-day extension can be helpful, but it’s vital to ensure all FUTA payments are up-to-date to qualify for the extended deadline.
Meeting the Form 940 deadline is crucial to avoid penalties and maintain good standing with the IRS.
Completing Form 940: A Step-by-Step Guide
Form 940 is a two-page form divided into seven parts, along with a payment voucher. Let’s break down each part to help you understand how to fill it out accurately.
Image of Form 940 first page
Alt text: First page of IRS Form 940 displaying sections for business identification and FUTA tax calculation.
Before starting, ensure you have your Employer Identification Number (EIN), business name, trade name (if applicable), and business address ready. Remember, your EIN is essential; you cannot use a Social Security number or other Tax Identification Number (TIN) in its place.
Part 1: Type of Return
- Line 1a: Check this box if you are required to pay state unemployment tax in only one state.
- Line 1b: Check this box if you are a multi-state employer and pay unemployment taxes in more than one state. If you check this box, you’ll need to complete Schedule A of Form 940.
- Line 2: Check this box if your business is located in a credit reduction state. If so, you also need to complete Schedule A. Credit reduction states have not repaid money they borrowed from the federal government to pay unemployment benefits.
Part 2: Computation of Taxable Wages
This section focuses on calculating your FUTA tax liability.
- Line 3: Enter the total payments you made to employees during the year.
- Line 4: Report any payments that are exempt from FUTA tax, such as certain fringe benefits or group-term life insurance.
- Lines 5-8: These lines guide you through calculating your total taxable FUTA wages and your total FUTA tax before any adjustments.
Part 3: Adjustments
This part accounts for adjustments based on your state’s unemployment tax rules.
- Line 9: If all the FUTA wages reported in Part 2 were exempt from state unemployment tax, multiply Line 7 by 0.054 and enter the result here. Then proceed to Part 4.
- If not all wages were exempt, you’ll need to use the worksheet on page 11 of the Form 940 instructions (IRS Publication 15 (Circular E), Employer’s Tax Guide) to calculate your adjustment.
Part 4: Total FUTA Tax Due or Overpayment
- Line 12: Calculate your total FUTA tax after adjustments by adding Lines 8, 9, 10, and 11.
- Line 13: Enter any FUTA tax payments you’ve already made for the year, including any overpayments from the previous year.
- Lines 14 & 15: These lines determine if you have a balance due or if you overpaid your FUTA tax.
Part 5: Quarterly FUTA Tax Liability
- If the amount on Line 12 (total FUTA tax) is more than $500, you must complete boxes 16a-d. Report your FUTA tax liability for each quarter in the respective boxes. These amounts should total the amount on Line 12. This section is for informational purposes and reflects your cumulative liability, not necessarily your quarterly deposit amounts.
Part 6: Third-Party Designee
- This section allows you to designate an employee or a paid tax preparer to discuss Form 940 with the IRS on your behalf. This is optional.
Part 7: Signature
- Once you’ve completed the form, you, as the business owner or authorized representative, must sign and date Form 940.
Payment Voucher (Form 940-V)
If you owe FUTA tax, you must include a payment voucher, Form 940-V, with your payment. This voucher is usually found on page 3 of the PDF version of Form 940 provided by the IRS. Fill in your EIN, total payment amount, business name, and address on the voucher.
Where Do I Send the 940 Form? Filing Options
Now, addressing the key question: where do I send the 940 form? You have two main options for filing Form 940: electronically or by mail. The IRS encourages electronic filing as it is more efficient and accurate.
1. Electronic Filing (E-filing):
The IRS prefers that you e-file Form 940. E-filing offers numerous benefits, including faster processing, confirmation of receipt, and reduced errors. You can e-file Form 940 through various IRS-approved software providers or through the IRS-authorized e-file program. Visit the IRS website for a list of providers and detailed instructions on how to e-file employment taxes.
2. Filing by Mail (Paper Filing):
While e-filing is preferred, you can still file a paper copy of Form 940. The mailing address for Form 940 depends on whether you are including a payment with your return.
- If you are including a payment with Form 940: You will need to mail your form, along with Form 940-V and your payment, to the appropriate IRS address based on your state.
- If you are not including a payment with Form 940 (or are paying separately via electronic methods): The mailing address will be different.
To determine the correct mailing address, consult the official IRS “Where to File” chart for Form 940. This chart is available on the IRS website and is regularly updated. You can find the most current table by searching “where to file form 940” on IRS.gov or by directly accessing this IRS page.
Always double-check the IRS website for the most up-to-date mailing addresses as they can change. Using the correct address will ensure your form is processed promptly and avoids delays.
Streamlining Your Tax Filing with Professional Help
Tax forms like Form 940 can be complex and time-consuming. Utilizing accounting software or professional services can significantly simplify the process. Bench, for example, offers bookkeeping and tax support services that can help you manage your business finances and ensure accurate and timely tax filings, although they do not directly handle employment tax filings like Form 940. These services can free up your time and reduce the stress associated with tax compliance, allowing you to focus on growing your business.
Conclusion
Understanding Form 940 and, crucially, where do I send the 940 form, is a vital part of employer tax responsibilities. Whether you choose to e-file or mail your return, ensure you adhere to the deadlines and use the correct filing method and address as specified by the IRS. By staying informed and organized, you can confidently manage your FUTA tax obligations and contribute to the unemployment system while maintaining compliance for your business.
