Detailed Breakdown of the Annual IRS Form 940
Form 940, issued by the IRS, is a yearly tax return that employers must submit. A refresher might be in order with nearly a year since the last filing for established businesses. Here's a convenient starter guide for those running a business yet to file a Form 940!
Understanding IRS Form 940 and its filing requisites?
The Employer's Annual Federal Unemployment (FUTA) Tax Return, or Form 940, is designed for reporting FUTA taxes to the IRS.
As per the IRS, employers must file this if they have paid employees $1500 or above during any quarter of the current or last tax year or if they have hired employees for 20 weeks within the tax year. This covers all types of employment: full-time, part-time, or seasonal/temporary. Remember, individual states also levy their unemployment taxes, termed SUTA, which play a role in the Form 940 completion.
Decoding the Credit Reduction in Form 940?
The term 'Credit Reduction' might have crossed your path, making you ponder its relevance to Form 940. Essentially, credit reduction states have taken loans from the federal government and haven't repaid them yet.
In the tax year 2024, the credit reduction rate is 0.3% for California, Connecticut, Illinois, and New York, and 3.6% for the U.S. Virgin Islands.
Definition of Multi-State Employers?
Multi-state employers are businesses that have to pay state unemployment taxes in multiple states because their employees are located in these states. Such employers must mark themselves multi-state employers on line 1b of Form 940. Also, they are required to fill out and attach Schedule A (Form 940) for determining credit reduction details.
What details are needed to complete the 2024 Tax Year Form 940?
When filling out Form 940, ensure your primary business details are readily available.
- Business name
- Registered address
- Employer Identification Number (EIN)
Additionally, you should be able to provide the total compensation paid to all your employees, and calculate your share of FUTA taxes. Having data on your FUTA tax deposits is also essential.
What is the submission deadline for the 940 tax form?
The 2024 tax year's Form 940 submission date to the IRS is January 31st, 2025. If this date lands on a weekend or a public holiday, the deadline is extended to the next business day. However, if FUTA taxes have been fully deposited, you must file the form until February 10th, 2025.
For more information about official IRS deadlines, check out our complete form deadlines.
Are there any consequences for failing to report Form 940 with the IRS?
If a business does not submit a correct 940 tax form to the IRS by January 31st, 2025, the IRS will impose fines.
To evade unnecessary interest and penalties from the IRS, be sure to:
- Timely deposit your FUTA taxes
- Submit your yearly Form 940 by the correct deadline
- Include the necessary Schedules (A, R)
For the submission of Form 940, opt for the IRS-approved e-filing method.
BoomTax and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors prior to engaging in any transaction.
