2 0 07
Department of the Treasury
Internal Revenue Service
Instructions for Form 940
Employer’s Annual Federal Unemployment (FUTA) Tax Return
For a list of related employment tax topics, visit the IRS
Section references are to the Internal Revenue Code unless
website at and click on the “Businesses” tab.
Understanding Form 940
No credit reduction states. The U.S. Department of Labor
(DOL) has announced that there are no credit reduction states
What’s the Purpose of Form 940?
for tax year 2007. Therefore, do not complete lines 2 and 11.
FUTA rate for 2008. The FUTA tax rate is scheduled to
Use Form 940 to report your annual Federal Unemployment
decrease from 6.2% to 6.0% for 2008. However, legislation is
Tax Act (FUTA) tax. Together with state unemployment tax
pending that would eliminate the reduction in the rate. If the
systems, the FUTA tax provides funds for paying
legislation is enacted, the rate will remain at 6.2% for 2008.
unemployment compensation to workers who have lost their
jobs. Most employers pay both a federal and a state
unemployment tax. Only employers pay FUTA tax. Do not
State unemployment information. You are no longer
collect or deduct FUTA tax from your employees’ wages.
required to list your state reporting number(s) on Form 940.
The FUTA tax applies to the first $7,000 you pay to each
When you registered as an employer with your state, the state
employee during a calendar year after subtracting any
assigned you a state reporting number. If you do not have a
payments exempt from FUTA tax.
state unemployment account and state experience tax rate, or if
you have questions about your state account, you must contact
These instructions give you some background information
your state unemployment agency. A contact list (for general
about the Form 940. They tell you who must file the form, how
information only) of state unemployment tax agencies is
to fill it out line by line, and when and where to file it.
provided on page 12.
Who Must File Form 940?
You can file and pay electronically. Using electronic options
available from the Internal Revenue Service (IRS) can make
filing a return and paying your federal tax easier. You can use
Except as noted below, if you answer “Yes” to either one of
IRS e-file to file a return and Electronic Federal Tax Payment
these questions, you must file Form 940:
System (EFTPS) to make deposits or pay in full whether you
Did you pay wages of $1,500 or more to employees in any
rely on a tax professional or prepare your own taxes.
calendar quarter during 2006 or 2007?
For IRS e-file, visit for additional information.
Did you have one or more employees for at least some part
For EFTPS, visit or call EFTPS Customer
of a day in any 20 or more different weeks in 2006 or 20 or
Service at 1-800-555-4477, 1-800-733-4829 (TDD), or
more different weeks in 2007? Count all full-time, part-time, and
temporary employees. However, if your business is a
partnership, do not count its partners.
Electronic funds withdrawal (EFW). If you file Form 940
electronically, you can e-file and e-pay (electronic funds
If your business was sold or transferred during the year,
withdrawal) the balance due in a single step using tax
each employer who answered “Yes” to at least one question
preparation software or through a tax professional. However,
above must file Form 940. However, do not include any wages
do not use EFW to make federal tax deposits. For more
paid by the predecessor employer on your Form 940 unless you
information on paying your taxes using EFW, visit the IRS
are a successor employer. For details, see b. Successor
website at and click on the electronic irs link. A fee
employer under Type of Return on page 5.
may be charged to file electronically.
If you received a preprinted Form 940 and are not liable for
You can pay your balance due by credit card. You may pay
FUTA tax for 2007 because you made no payments to
your FUTA tax shown on line 14 using a major credit card.
employees in 2007, check box c in the top right corner of the
However, do not use a credit card to pay taxes that are
form. Then go to Part 7, sign the form, and file it with the IRS.
required to be deposited. (See When Must You Deposit Your
FUTA Tax? on page 3.) For more information on paying your
If you will not be liable for filing Form 940 in the future
taxes with a credit card, visit the IRS website at
because your business has closed or because you stopped
and click on the electronic irs link.
paying wages, check box d in the top right corner of the form.
See d. Final... under Type of Return on page 5 for more
Photographs of missing children. IRS is a proud partner
with the National Center for Missing and Exploited Children.
Photographs of missing children selected by the Center may
For employers of household employees . . .
appear in instructions on pages that would otherwise be blank.
If you are a household employer, you must pay FUTA tax on
You can help bring these children home by looking at the
wages that you paid to your household employees only if you
photographs and calling 1-800-THE-LOST (1-800-843-5678) if
paid cash wages of $1,000 or more in any calendar quarter in
you recognize a child.
2006 or 2007.
How Can You Get More Help?
A household employee performs household work in a:
If you want more information about this form, see Pub. 15
(Circular E), visit our website at , or call
local college club, or
local chapter of a college fraternity or sorority.
Cat. No. 13660I