Form 940 for 2023 - An Overview
Updated on January 27, 2024 - 10:30 AM by Admin, TaxBandits
Form 940 is an IRS tax form that is filed annually by employers. If your business hasn’t filed a Form 940 before, here is a helpful guide to get started with your 940 filing!
Table of Contents:
1. What is Form 940?
- Form 940: Employer's Annual Federal Unemployment Tax Return
- What’s reported on Form 940: Federal unemployment tax (FUTA)
- Who needs to file: Employer who paid wages to employees.
- When it's filed: Annually
- When it is due: January 31, 2024
Form 940 is an annual IRS tax form used by employers to report the
Federal Unemployment Tax Act (FUTA) tax. FUTA (Federal Unemployment Tax Act) refers to the federal tax that employers are required to pay to fund unemployment benefits for workers who have lost their jobs.
This tax is not withheld from employee wages; instead, employers are responsible for paying FUTA tax on the wages they pay to their employees, up to a certain wage base. The tax rate and wage base can vary from year to year and are determined by federal regulations. 940 Form is used to report and calculate the amount of FUTA tax owed by an employer for a given tax year.
2. Who must file Form 940?
Employers are required to file Form 940 under the following conditions:
- If they have paid wages of $1,500 or more in a calendar quarter.
- If they have more than one employee for at least some part of a day in any 20 or more different weeks during the year. These include full-time, part-time, or seasonal/temporary employment.
Employers who hire independent contractors are exempt from filing Form 940 because they don't pay unemployment taxes on the contractors' earnings. Instead, they are responsible for filing Form 1099-NEC for each contractor. It's crucial to be aware that states have their own unemployment taxes, known as SUTA, which need to be considered when completing Form 940.
Certain entities are not required to pay FUTA taxes and are not required to file Form 940.
Exempt entities are:
File Form 940 only if total wages paid to household employees amount to $1,000 or more during any
Filing is necessary if either cash wages of $20,000 or more are paid to farmworkers in any calendar quarter or if ten or more farmworkers are employed for at least part of a day during 20 or more different weeks throughout the year.
Exempt from filing as long as fully compliant with applicable State Unemployment Insurance requirements.
State and local governments
Exempt from filing Form 940.
Organizations under section 501(c)(3) of the Internal Revenue Code are exempt from both income tax and FUTA. Therefore, not required to file Form 940.
3. What is the difference between Form 940 and 941?
Generally, Form 940 and Form 941 are both related to employers' tax reporting, but they serve different purposes:
Form 940 is used to report and pay the Federal unemployment tax, also known as FUTA
Form 941 is used to report employment taxes, including Federal income tax withholding, Social Security tax, and Medicare tax, for employees. It also includes the employer's portion of these taxes.
940 Filing is done annually, and it summarizes the amount of FUTA tax owed for the entire year.
Employers are required to file Form 941 on a quarterly basis (four times a year) to report the tax liabilities for each quarter.
Learn more in detail about the Form 940 vs 941 and gain a comprehensive understanding of these forms.
4. What is Credit Reduction in Form 940?
You may have heard the term, Credit Reduction, and wondered how this is relevant to Form 940. Credit reduction states have borrowed money from the federal government but have not yet paid this back. Additionally, you are required to complete and attach Form 940 Schedule A to determine credit reduction information.
The credit reduction rate is as follows:
|Credit Reduction Rates for 2022
|Credit Reduction Rates for 2023
|U.S. Virgin Islands
Who are Multi-State Employers?
Multi-state employers are required to pay state unemployment taxes in more than one state because they hire employees across more than one state. You will need to indicate that you are a multi-state employer by checking the box on line 1b of Form 940.
5. What information is required to file Form 940 for 2023?
To get started with Form 940, you will need to have your basic business information on hand.
This includes the Name, Legal address, and Employer Identification Number (EIN). You will also need to have the total payments made to all employees and figure your employer-share of FUTA taxes. It is also crucial that you have information regarding your FUTA liability deposits.
6. When is the deadline to file 940 tax Form?
The deadline to file Form 940 with the IRS for the 2023 tax year is January 31, 2024. If the due date falls on the weekend or a federal holiday then the following day is the deadline. If the FUTA taxes are deposited, then it can be filed by February 10, 2024.
7. Are there any penalties associated with IRS Form 940?
If your business fails to file 940 Form with the IRS by January 31, 2024, the IRS will assess penalties.
By doing the following you can avoid unwanted interest and penalties from the IRS:
- Deposit your FUTA taxes on time
- File your annual Form 940 by the deadline
- Attach the required Schedules (A, R)
For filing Form 940, select the IRS recommended way of e-filing. With TaxBandits, you can
E-file 940 Form easily with the other supported Forms.
8. Who Must Sign Form 940?
The individual authorized to sign Form 940 varies based on the type of business entity:
Owner of the business
Partnership or Unincorporated Organization
Responsible partner, member, or officer
President, vice president, or principal officer
Single-member LLC (Disregarded Entity)
Owner or authorized officer
Trust or Estate
Additionally, Form 940 can be signed by a duly authorized agent if a valid power of attorney or reporting agent authorization (Form 8655) has been filed. Paid preparers must sign Form 940 and provide information in the Paid Preparer Use Only section of Part 7 if they were paid to prepare the form and are not an employee of the filing entity. Manual signatures are required for paper returns, and the preparer must furnish a copy of the return to both the entity and the IRS.
9. E-File Form 940 with TaxBandits
Filing Form 940 with TaxBandits is a streamlined and efficient process that simplifies your tax reporting. We provide a range of features to make your tax filing experience hassle-free:
TaxBandits allows you to file multiple Form 940 returns simultaneously, saving your time and effort.
Supports Multiple Forms
We support various Form 940 variations, including 940-PR, and 940 Schedule R forms, ensuring that you can easily file the appropriate form for your business.
Multiple Payment Options
TaxBandits offers multiple payment options, making it convenient for you to settle your IRS balance due.
With TaxBandits, you can confidently manage your tax filing requirements. So, don't wait any longer – get started today and experience the ease and efficiency of e-filing Form 940 with TaxBandits.