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Department of the Treasury

Internal Revenue Service

Instructions for Form 940

Employer’s Annual Federal Unemployment

(FUTA) Tax Return

Section references are to the Internal Revenue Code unless otherwise noted.

State unemployment information. You must contact

What’s New

your state unemployment tax office to receive your state

reporting number, state experience rate, and details

Credit reduction state. A state that has not repaid

about your state unemployment tax obligations.

money it borrowed from the federal government to pay

unemployment benefits is a “credit reduction state.” The

Worksheet for computing the Part II, line 4 credit if

Department of Labor determines these states. If an

state contributions were paid late. Filers who made

employer pays wages that are subject to the

contributions to their state unemployment fund after the

unemployment tax laws of a credit reduction state, that

due date for filing Form 940 should complete the

employer must pay additional federal unemployment tax

worksheet provided in the instructions for Part II, line 4,

when filing its Form 940. Employers in a credit reduction

on page 6, to compute the allowable credit. Do not report

state cannot file Form 940-EZ.

such contributions in Part II, line 3, column (i) or on line

3b. Any credit allowed for such state contributions will

For 2004, New York is a credit reduction state. If you

appear on line 4.

paid any wages that are subject to the unemployment

compensation laws of the State of New York, you are not

Electronic Filing and Payment

allowed .003 of the regular .054 credit. Use Form 940,

Now, more than ever before, businesses can enjoy the

Part I, line 6 to show this tax. If you must complete Form

benefits of filing and paying their federal taxes

940, Part III, Record of Quarterly Federal Unemployment

electronically. Whether you rely on a tax professional or

Tax Liability, include any additional tax from Part I, line 6

handle your own taxes, IRS offers you convenient

in the fourth quarter column and include the amount with

programs to make it easier.

your fourth quarter tax deposit.

Spend less time and worry on taxes and more time

New lines for credit reduction computations. We

running your business. Use e-file and Electronic Federal

added Part I, line 6 to show the additional FUTA tax due

Tax Payment System (EFTPS) to your benefit.

from employers in a credit reduction state. We moved the

•

For e-file, visit for additional information.

“Credit” line in Part II (formerly line 6) to line 4, added

•

For EFTPS, visit or call EFTPS

Part II, line 5 to show the credit reduction amount, and

Customer Service at 1-800-555-4477.

designated Part II, line 6 as “Credit allowable.”

Use electronic options available from IRS and make

Increase to FUTA tax deposit threshold. The Treasury

filing and paying taxes easier.

Department recently amended Regulations section

31.6302(c)-3 to increase the accumulated FUTA tax

Photographs of Missing Children

deposit threshold from $100 to $500. The $500 threshold

The Internal Revenue Service is a proud partner with the

applies to FUTA tax deposits required for taxes reported

National Center for Missing and Exploited Children.

on Forms 940, 940-EZ, and 940-PR, Employer’s Annual

Photographs of missing children selected by the Center

Federal Unemployment (FUTA) Tax Return, for tax

may appear in instructions on pages that would otherwise

periods beginning after December 31, 2004.

be blank. You can help bring these children home by

New line for name and EIN. We added a new line to the

looking at the photographs and calling 1-800-THE-LOST

top of page 2 on Form 940 to be completed by filers

(1-800-843-5678) if you recognize a child.

using forms that were not preaddressed by the IRS.

Purpose of Form

General Instructions

Use Form 940 (or Form 940-EZ) to report your annual

Federal Unemployment Tax Act (FUTA) tax. FUTA tax,

Reminders

together with state unemployment systems, provides for

payments of unemployment compensation to workers

Mailing address change. You may need to mail Form

who have lost their jobs. Most employers pay both

940 to a different address than in previous years because

federal and state unemployment taxes. Only the

the IRS has changed the filing location for several areas.

employer pays FUTA tax. Do not collect or deduct it

If an envelope was received with the tax package, please

from your employees’ wages. The tax applies to the first

use it. Otherwise, see Where To File on page 3.

$7,000 you pay each employee in a year after subtracting

Signature on Form 940. Only an authorized individual

any exempt payments. The $7,000 amount is the federal

may sign Form 940. See Signature on page 8.

wage base. Your state wage base may be different.

Cat. No. 13660I

Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2004

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