What is Form 940?

As an employer, you’ll file Form 940 to report your annual Federal Unemployment Tax Act (FUTA) tax liability. The FUTA tax and state unemployment taxes provide funds for unemployment compensation paid to workers who have lost their jobs. Only employers pay these taxes, so you will not take them out of your employees’ paychecks. 

The FUTA tax applies to the first $7,000 each employee makes in a calendar year. The current FUTA tax rate is 6%, but most employers receive a maximum credit of 5.4% based on unemployment taxes paid to your state. If you paid all your state unemployment taxes on time, you are entitled to the maximum credit.

For tax year 2019, Form 940 is due by January 31, 2020.