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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.

otherwise noted.

What’s New

General Instructions:

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

Reminders

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

1-800-244-4829 (Spanish).

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

information.

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

private home,

•

(Circular E), visit our website at , or call

local college club, or

•

1-800-829-4933.

local chapter of a college fraternity or sorority.

Cat. No. 13660I

Instructions For Form 940 - Employer'S Annual Federal Unemployment (Futa) Tax Return - 2007

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