New employers often assume one federal payroll return covers everything. It does not. Two forms with similar numbers cover two entirely different sets of taxes, and missing either one draws penalties. This guide puts them side by side.
At a glance
- Form 941: Employer's Quarterly Federal Tax Return. Reports federal income tax withheld, plus employer and employee Social Security and Medicare taxes.
- Form 940: Employer's Annual Federal Unemployment (FUTA) Tax Return. Reports federal unemployment tax.
- Frequency: Form 941 every quarter, Form 940 once a year.
- Who pays: Form 941 taxes are shared by employer and employee. The IRS says only employers pay FUTA tax, and employers must not collect or deduct FUTA tax from employees' wages.
Form 941 in brief
The IRS says employers report on Form 941 the federal income tax, Social Security, and Medicare taxes withheld from employees' paychecks, plus the employer's share of Social Security and Medicare taxes. It reconciles the quarter's liability to deposits made. See Form 941 filing help.
Form 940 in brief
FUTA funds the federal side of unemployment benefits, working alongside state unemployment systems. Most employers pay both federal and state unemployment taxes. The federal tax is generally figured on the first $7,000 of each employee's wages, at a nominal rate of 6.0%, which is reduced by a credit of up to 5.4% when you pay state unemployment tax on time, so the effective federal rate is often 0.6% in those cases. In states with a credit reduction, the IRS says Schedule A of Form 940 is used to calculate the FUTA tax. Confirm current rules and any credit reduction states for the year in the instructions.
Dates and deposits
- Form 941 is generally due the last day of the month after each calendar quarter ends, with deposits made earlier under your monthly or semiweekly schedule.
- Form 940 is generally due January 31 after the tax year ends. FUTA is deposited quarterly when the accumulated liability passes a threshold, so most small employers deposit once or a few times a year. Verify the threshold and dates in the current instructions.
- Corrections: Form 941-X for the quarterly return. Form 940 corrections are made by filing a corrected annual return.
The rest of the payroll calendar
- 1Each payday: withhold taxes, pay employees, and record the liability.
- 2Each deposit date: send the required taxes through EFTPS or your provider.
- 3Quarterly: file Form 941 and state payroll returns.
- 4Annually by January 31: file Form 940, provide Forms W-2 to employees, and file W-2 and W-3 with the Social Security Administration.
- 5Throughout: file state unemployment returns on your state's schedule.
Common mix-ups
- Thinking a payroll provider's deposits cover both forms automatically. Confirm that the provider files both.
- Withholding FUTA from employees. It is an employer-only tax.
- Missing the state unemployment filing, which can cost you the FUTA credit.
- Not filing Form 940 because wages were low. Having employees generally triggers the requirement.
State obligations differ
State unemployment taxes, state withholding, and local taxes are separate registrations and filings. Rates and wage bases differ by state. For multi-state employers, see multi-state payroll taxes.
For penalties on late filings, see payroll tax penalties. Our payroll service files both forms and tracks the state side. To talk about your payroll requirements, tell us where your employees work and how many you have.
