Form 940

If you have employees, chances are you’ve heard about Form 940. This IRS form is how businesses report and pay federal unemployment taxes (FUTA). Unlike income taxes, employers pay FUTA taxes entirely, meaning there are no deductions from employee wages.

Homebase Team

Min Read

What is Form 940?

If you have employees, chances are you’ve heard about Form 940. This IRS form is how businesses report and pay federal unemployment taxes (FUTA). Unlike income taxes, employers pay FUTA taxes entirely, meaning there are no deductions from employee wages.

Understanding Form 940 is crucial because it helps fund unemployment benefits for workers who lose their jobs. As a reporting agent, Homebase will file several federal, state, and local tax forms on behalf of your company, including Form 940.

Who is required to file Form 940?

Not all businesses are required to file Form 940, but most employers do. You must file if:

You paid employees $1,500 or more in wages in any calendar quarter.
You had at least one employee for part of a day in 20 or more weeks during the year (this includes full-time, part-time, and temporary employees).

If you meet either of these conditions, Form 940 must be on your tax filing checklist.

Calculating FUTA tax: what you need to know

The FUTA tax is 6.0% on the first $7,000 of each employee’s annual wages. However, most employers qualify for a FUTA tax credit of up to 5.4%, reducing the actual tax rate to 0.6%. This means you could pay as little as $42 per employee per year.

To qualify for the full tax credit, you must pay your state unemployment taxes on time. Late state tax payments can reduce your credit and increase your FUTA tax rate.

When is Form 940 due for filing?

The IRS requires businesses to file Form 940 annually, with a deadline of January 31 of the following year. If you’ve already paid all your FUTA taxes on time, you get an extended due date of February 10.

With Homebase payroll, you’ll never miss another tax deadline. Our automated system keeps you on track, handling the due dates so you can focus on your business.

How to file Form 940

You can file Form 940 in a few ways:

Electronically: Through the IRS E-File system.
By mail: Though paper filing can take longer to process.
Through payroll providers: Homebase payroll can automate this entire process, filing Form 940 on your behalf and keeping your business compliant.

If handling tax filings sounds like a headache, Homebase payroll can make things easier. Our system automatically calculates and files Form 940 on your behalf, ensuring you meet IRS deadlines without stress.

Try Homebase payroll today to take the hassle out of tax filings.

Mistakes to watch out for when filing Form 940

Errors in filing Form 940 can lead to delays, penalties or fines. Here are common mistakes to watch out for:

Missing the deadline – Late filings can result in penalties and interest charges.
Underpaying FUTA tax – Ensure you calculate the correct tax rate based on your state’s credit.
Not reporting all wages – Only the first $7,000 of wages per employee is taxable, but all employees must be reported.
Forgetting state unemployment taxes – Late state payments can increase your FUTA tax rate.

Avoiding these mistakes will save you time, money, and frustration when dealing with the IRS.

How Homebase simplifies tax filing and payroll

Keeping up with tax forms like Form 940 can be overwhelming, but Homebase payroll handles it for you. With Homebase, you can:

Automate payroll tax calculations and filings.
Ensure FUTA and state unemployment taxes are paid accurately and on time.
Keep tax records organized and easy to access.
Avoid IRS penalties by staying compliant with filing deadlines.

Sign up for Homebase today and let us handle the tax filings while you focus on growing your business.

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