Form 940 Instructions

What's New in the IRS Form 940?

• Aggregate return filers: Use the new “Aggregate Return Filers Only” section on Form 940 to indicate whether you’re filing as a section 3504 agent, a certified professional employer organization (CPEO), or a third-party filer.
• Direct deposit of Form 940 refund: Following Executive Order 14247 (March 25, 2025), the IRS now issues Form 940 refunds by direct deposit for faster and more secure payments. You can also apply any overpayment to your next return (see line 15b).
• Electronic Payments Required: EO 14247 also mandates electronic payment of any balance due on Form 940. See line 14 instructions for details.
• Electronic Return Transcripts: Form 940 transcripts for tax years 2023 and later are now available through your IRS Business Tax Account at IRS.gov/BusinessAccount.
• Credit reduction state: For 2025, if you paid wages in a credit reduction state, your FUTA credit will be reduced based on that state’s credit reduction rate. Use Schedule A (Form 940) to calculate the reduction.

Step- by- Step instructions for Form 940:

• Enter the EIN, Name of your business, trade name (if any), complete address such as number, street, city, state and ZIP code.
• Types of Return — Check all that apply:
1. Amended – Use if you’re correcting a previously filed return.
2. Successor employer – Use if you’ve taken over another business
3. No payments to employees in 2025 – Use if you had no employee wages during the year.
4. Final – Use if your business has closed or you permanently stopped paying wages.
• Aggregate Return Filers Only - Choose any one box that applies:
• Section 3504 Agent — Check this if you are an employer agent who is filing on behalf of clients under section 3504.
• Certified Professional Employer Organization (CPEO) — check this if a CPEO is filing this return on behalf of the client.
• Other Third Party — Check this box, if you are a third-party filer.
• If you are not an aggregate filer, leave these boxes blank.

Part 1: Information about the Form 940 return

In Part 1 of the 940 Form, you must provide some basic information about your return. Leave any lines that do not apply to your business blank.

• Line 1a: Indicate if you are an employer who has paid unemployment taxes in only one state. Enter the abbreviation for that state.
• Line 1b: Indicate whether you have paid unemployment taxes in more than one state. This means your company is a multi-state employer, and you must complete and attach Form 940 Schedule A.
• Line 2: Indicate whether you paid wages in a credit-reduction state.

Part 2: Determine your FUTA tax before adjustments

In Part 2 of Form 940, you will calculate your FUTA tax before any adjustments. Again, skip any lines that do not pertain to your business.

• Line 3: Enter the total payments made to all employees, even if some are not subject to FUTA taxes.
• Line 4: List any payments that are exempt from FUTA tax. For example, payments that do not meet the definition of wages. Check each of the following that apply:
  1. Fringe benefits
  2. Group-term life insurance
  3. Retirement/Pension
  4. Dependent care
  5. Other
• Line 5: Enter any payments made to an employee that exceed $7,000. The FUTA wage base is $7,000, meaning that any amount above this threshold is not subject to FUTA taxes. Subtract any payments exempt from FUTA taxes from this total.
• Line 6: Enter the subtotal. Add the amounts from Lines 4 and 5, then record the total on Line 6.
• Line 7: Total taxable FUTA wages. To calculate this amount, subtract the amount on Line 6 from the amount on Line 3.
• Line 8: FUTA tax before modifications. Multiply the amount on Line 7 by 0.006 to calculate this amount.

Part 3: Determine your adjustments

In Part 3, you will make your adjustments. Only fill out the lines that apply to your business.

• Line 9: If all taxable FUTA wages were exempt from state unemployment taxes, multiply the amount on Line 7 by 0.054 and enter the result here. Then proceed to Part 4.
• Line 10: If some of the taxable FUTA wages were exempt from state unemployment taxes, complete this line accordingly. Also, be sure to fill out Line 9 if you paid any state unemployment taxes late.
• Line 11: If a credit reduction applies, complete this line by entering the total from Schedule A.

Part 4: Determine your FUTA tax and balance due or overpayment

In Part 4, you will be determining your FUTA tax balance due and if you overpaid.

• Line 12: This is the total of Lines 8, 9, 10, and 11. If the amount on Line 9 is more than zero, then Lines 10 and 11 must be zero.
• Line 13: Enter your FUTA deposits for the year here, including any overpayments made in the previous year.
• Line 14: Calculate the balance due. If the amount on Line 13 is less than the amount on Line 12, enter the difference here.
• Line 15a: If Line 13 is greater than Line 12, enter the difference on line 15a.
• Line 15b: If you have an overpayment, select whether you want the amount applied to your next return or as arefund.
• Line 15c: Enter the routing number
• Line 15d: Check the account type – checking or savings
• Line 15e: Enter the account number savings

Part 5: Report your FUTA tax liability by quarter only if line 12 is more than $500

You only need to complete Part 5 of Form 940 if the amount you entered on Line 12 is $500 or more; otherwise, skip to Part 6.

• Line 16: Enter your FUTA liabilities for each quarter.
  1. (Q1)
  2. (Q2)
  3. (Q3)
  4. (Q4)
• Line 17: Calculate the total FUTA liability for the year by adding the amounts from each quarter.

Use these Form 940 instructions to easily file Form 940.

Part 6: Third-party designee information

What is the mailing address for paper filing of Form 940?

If you file a paper return, the filing address depends on whether you include a payment with Form 940. Mail your return to the address listed for your location in the table below. Please note that the IRS encourages filing Form 940 electronically.