Most small business owners are required to file Form 940 every year. However, whether you’ve filed before or not, you may still have some questions about the form.
At CSI Accounting & Payroll, we’ve helped small businesses with their taxes for over 50 years. That means we’ve gotten a lot of questions about tax forms, including these questions about Form 940:
- What is Form 940? What is it used for?
- Do I need to file Form 940? What if I have no payroll?
- How do I fill out Form 940? Where do I send it, and when is it due?
What Form 940 Is Used For
Form 940 is the Employer’s Annual Federal Unemployment (FUTA) Tax Return, but many people will refer to it as the FUTA tax return.
It reconciles your FUTA tax liability (based on wages paid to employees) with the tax payments you’ve made throughout the year. This reveals how much of this tax you still owe. If the numbers don’t match up to have a balance of $0, the IRS will send you a letter.
If you overpaid, they’ll ask where you’d like to apply the credits. If you underpaid, they’ll tell you how much you still owe, plus any penalties and interest for late payments.
Who Needs to File Form 940
Essentially, anybody who has payroll must file this form. That means anybody who has employees – and since corporation owners are considered employees, they must pay FUTA on their own wages even if they don’t have other employees.
Owners of companies taxed as sole proprietorships or partnerships with no employees would have no payroll to report on Form 940, and therefore no tax. This means they don’t need to file it.
The exception is if you’ve filed in the past but didn’t mark your last return as final. In this case, the IRS is still expecting a return from you, so you should check “No payments to employees in [year]” for the Type of Return and fill it out as $0. If you expect it to be your last, you could also mark it as final.
How to Fill out and Submit Form 940
To complete your Form 940, you can find the instructions included with your form. The IRS also offers additional instructions.
To stay in compliance, this return is due by January 31 each year for the previous year. If that date falls on a weekend or an observed holiday, the due date gets pushed to the next business day.
Payments are owed on the last of the month following the quarter if your total liability is more than $500 for the year. If it’s less, the balance can carry over to the next quarter until $500 is reached. Payments can be made with the attached Form 940-V.
You can submit the form via a mailed paper return or upload to the IRS website.
It’s important to file correctly. If a mistake was made, you need to find out where and how it’s wrong, find the right number, then do an amended return using the same form, but marking the top as amended.
Otherwise, a payroll specialist can help you!
Don’t Worry About Your 940s!
Many payroll services collect these taxes each payroll, but the big guys sit on the money and collect interest until the last minute. CSI Accounting & Payroll pays in your taxes each payroll by ACH, so you don’t have to worry about late fees!
We can handle the whole process for you as part of a standard payroll package.
Now that you know what Form 940 is used for, whether or not you need to file it, and how to complete the form, are you ready to check out payroll services to stay in compliance?
If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, check out our Small Business Payroll Kit, which includes a calendar that’s updated each year with 940 filing and payment due dates and much more!
