Form 940 is the annual FUTA return employers use for unemployment tax.
Payroll pros should know what Form 940 reports, how it differs from Form 941, and why FUTA deposits are related but separate from the annual return.
What Form 940 reports
Form 940 reports an employer’s annual Federal Unemployment Tax Act tax.
One federal FUTA return
Unlike Form 941, which is generally quarterly, Form 940 is the annual return for FUTA tax.
FUTA is not employee withholding
Only employers pay FUTA. It is not withheld from employee wages.
State unemployment matters
Form 940 accounts for state unemployment tax credit rules, including potential credit reductions.
Form 940 vs Form 941
- Form 940: annual FUTA tax reporting.
- Form 941: quarterly reporting for wages, tips, federal income tax withheld, Social Security tax, and Medicare tax.
- Deposits: paying payroll tax liabilities is not the same thing as filing the return that reports them.
Who should understand Form 940?
Payroll pros do not need to memorize every line, but they should understand the payroll purpose, annual FUTA reporting, and common contrasts with Form 941.
Payroll fundamentals
Focus on employer-only FUTA, annual reporting, and the basic difference between Form 940 and Form 941.
Payroll operations
Go deeper into state credit, credit reduction, deposits, reconciliation, and operational responsibility.
Payroll professionals
Use current IRS instructions before answering year-specific questions about due dates, deposits, and credit reductions.
Practice forms in context.
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