Form 940

Meaning & Definition

Employers file Form 940 each year to report their Federal Unemployment Tax Act (FUTA) tax liabilities on an annual basis. This is a federal unemployment tax (unemployment insurance) that is used by the government to provide unemployment benefits to employees who have been laid off due to no fault of their own. Employers must also file this form if they meet certain FUTA filing thresholds.

Important features of Form 940

• FUTA tax must be paid and filed each year. 
• IT funds Unemployment Compensation Programs. 
• Necessary for employers to be compliant with their payroll tax obligations, and also to properly report payroll taxes. 
• Furthermore, FUTA will help employers avoid any penalties associated with non-filing or filing late. 
• Finally, FUTA plays an important role in global HR and Payroll operations.

Legal & Regulatory Considerations

• The Federal Unemployment Tax Act (FUTA) in the USA governs this tax.  It is administered by the Internal Revenue Service (IRS).
• Every employer liable to pay FUTA taxes must file an annual return; however, there may be exceptions for some employers.
• The Income Tax Act, 1961 (India), does not apply to this tax.