What is Form 940?

Definition: Form 940 is an IRS return that employers use to report their federal unemployment taxes FUTA at the end of each year. The IRS uses this form to calculate the amount of employer tax payments made during the year as well as the amount of taxes due at the end of the year.

What is Form-940 Used For?

The form 940 doubles as an annual payroll return. In other words, employers file this with the IRS reporting how much they paid their employees for the year. The form requires that each employee be listed along with his or her social security number and total annual wages.

Since federal unemployment taxes are only based on the first $7,000 of employee wages, there is a calculation on the first page of the form to show the total taxable wages for the year.


The unemployment tax laws are constantly changing and so are the 940 form itself, but the basics will probably always be the same. First the total payments made to all employees are totaled and listed first. A supplementary schedule is usually provided to list out each employee’s information. Next payments exempt from FUTA taxes are taken out of the total along with payments made to employees over $7,000 for the year. The net amount you are left with is the taxable FUTA wages for the period.

Traditionally, a bookkeeper is in charge of filling quarterly returns and other payroll returns like the 940, but payroll service companies like Paychex and ADP have become more popular in recent years with all the changes to withholding laws and healthcare requirements. Payroll service companies typically do everything from make the payroll checks and remit employee withholding to file payroll returns.

Accountants do file payroll returns, but these forms are usually done by someone internally or a payroll service.