How to File Form 940 Electronically: Software, Deadlines, and Penalties

To file Form 940 electronically, you submit it through IRS-approved 94x Modernized e-File (MeF) software, sign it with one of four accepted electronic signature methods, and transmit it before the annual deadline. There is no free IRS portal for employment tax returns, so you either buy compatible software and file it yourself or pay a tax professional or payroll service to file for you. For tax year 2025, the return is due February 2, 2026, with an automatic extension to February 10 if every FUTA deposit during the year was made on time.1Internal Revenue Service. Instructions for Form 940 – Employers Annual Federal Unemployment (FUTA) Tax Return

Confirm You Actually Have to File

You owe FUTA and file Form 940 if either test is true for the current or prior calendar year: you paid $1,500 or more in wages in any single quarter, or you had at least one employee for some part of a day in 20 or more different weeks. If either applies, you file even when every employee earned less than the $7,000 FUTA wage cap.2Internal Revenue Service. Instructions for Form 940

Two groups do not file Form 940 at all. Section 501(c)(3) organizations are exempt from FUTA entirely.3Internal Revenue Service. Section 501(c)(3) Organizations – FUTA Exemption Household employers report their FUTA on Schedule H attached to Form 1040, not on Form 940.4Internal Revenue Service. Instructions for Schedule H

What You Need Before You Start

Your EIN

Every e-filed return requires your nine-digit Employer Identification Number. If the EIN is missing or does not match IRS records, the system rejects the return immediately. If you don’t have one, you can apply online at IRS.gov and receive it the same day.

IRS-Approved 94x MeF Software

Only software approved for the 94x MeF program can transmit Form 940. The IRS publishes the current list of approved providers at IRS.gov/EmploymentEfile, organized by tax year. Expect to pay for it; there is no IRS-run filing portal for employment tax returns.5Internal Revenue Service. E-File Employment Tax Forms Hiring a tax professional or payroll service is the alternative, and they use the same MeF system on your behalf.

An Electronic Signature

The IRS accepts four signature methods for e-filed employment tax returns:6Internal Revenue Service. Modernized e-File (MeF) for Employment Taxes Frequently Asked Questions

  • Online signature PIN. You apply through your software for a 10-digit PIN that the IRS mails to you. Allow at least 45 days for delivery, so apply well before the filing deadline.7Internal Revenue Service. Using a Form 94x Online Signature PIN to E-File Employment Tax Forms
  • Practitioner PIN. You and your tax professional complete Form 8879-EMP to create a 5-digit PIN that authorizes the professional to sign.
  • Reporting agent PIN. A payroll service or accounting firm authorized through Form 8655 signs all returns they file for you.8Internal Revenue Service. Form 8655, Reporting Agent Authorization
  • Form 8453-EMP. You physically sign the declaration, scan it as a PDF, and your software attaches it to the electronic return. No PIN needed.

Filing yourself for the first time and didn’t request the 10-digit PIN weeks ago? Form 8453-EMP is the fastest backup. Print, sign, scan, attach.

The Numbers Your Software Will Ask For

Your payroll records feed the return. Accuracy here matters more than anything else, because the IRS cross-references Form 940 against the quarterly state unemployment reports you have already filed.

Start with total compensation paid to all employees for the year, subtract payments exempt from FUTA (certain fringe benefits and other categories listed in the Form 940 instructions), then apply the $7,000-per-employee wage cap. Only the first $7,000 paid to each individual counts.9Office of the Law Revision Counsel. 26 USC 3306 – Federal Unemployment Tax Act

The gross FUTA rate is 6.0%, but timely state unemployment (SUTA) payments earn a credit of up to 5.4%, dropping the effective rate to 0.6% and capping tax at $42 per employee per year.10U.S. Department of Labor. Unemployment Insurance Tax Topic Your software runs this calculation once you enter your state contributions.

Credit Reduction States

When a state borrows from the federal government for unemployment benefits and doesn’t repay within two years, employers in that state lose part of the 5.4% credit.11Employment & Training Administration. FUTA Credit Reductions For tax year 2025, California faces a 1.2% credit reduction and the U.S. Virgin Islands faces a 4.5% reduction.12Federal Register. Notice of the Federal Unemployment Tax Act (FUTA) Credit Reductions Applicable for 2025 A California employer’s effective rate is 1.8% (the 0.6% base plus the 1.2% reduction). Your software prompts you for the states you paid SUTA to and applies the reduction automatically.

Transmit and Confirm Acceptance

Your software validates the return for missing fields, math errors, and formatting problems. You apply your electronic signature and transmit; the software encrypts the package and sends it to the IRS MeF servers.

Right after transmission, you get an initial acknowledgment that the data package arrived. That is not acceptance. Within 24 to 48 hours, a second notice arrives with either “Accepted” or “Rejected.” Accepted means you are done, and your official filing date is the date of that acceptance. Rejected notices carry a specific error code (bad EIN, math error, schema violation); fix the error in your software and retransmit.

Save the acceptance confirmation. The IRS requires employers to keep employment tax records, including filed returns and confirmation numbers, for at least four years after filing the fourth quarter for that year.13Internal Revenue Service. Employment Tax Recordkeeping

Paying a Balance Due

Form 940 is an annual reconciliation. FUTA itself is paid throughout the year: any quarter your cumulative liability crosses $500, you must deposit that amount through the Electronic Federal Tax Payment System by the last day of the following month.14Internal Revenue Service. Depositing and Reporting Employment Taxes If your total FUTA for the year, or the fourth-quarter balance plus any undeposited amounts, is $500 or less, you can skip the deposit and pay with the return.15Internal Revenue Service. Topic No. 759, Form 940 – Filing and Deposit Requirements

If your reconciled return shows a balance due, pay it separately from the return itself. Two options work with an e-filed return:

  • EFTPS. Schedule the payment at EFTPS.gov. Payments must be submitted at least one business day before the due date by 8:00 PM Eastern to arrive on time.
  • Electronic Funds Withdrawal. Many 94x software packages let you authorize the IRS to debit your bank account on a date you choose during the filing process.

Overpaid? You can request a refund or apply the overpayment as a credit toward next year’s FUTA. Applying the credit is simpler and reduces your future deposit obligations.

The 2025 Filing Deadline

Form 940 is normally due January 31 of the year following the tax year. January 31, 2026 falls on a Saturday, so the tax year 2025 return is due Monday, February 2, 2026.1Internal Revenue Service. Instructions for Form 940 – Employers Annual Federal Unemployment (FUTA) Tax Return

If every FUTA deposit during 2025 was made on time, an automatic extension gives you until February 10, 2026 to file.2Internal Revenue Service. Instructions for Form 940 No paperwork is required. Miss even one deposit deadline and the extension is gone.

Penalties If You File or Pay Late

Two penalty provisions apply to Form 940 and they stack.

The failure-to-file penalty under IRC Section 6651 is 5% of the unpaid tax for each month or partial month the return is late, capped at 25%.16Office of the Law Revision Counsel. 26 USC 6651 – Failure to File Tax Return or to Pay Tax It is calculated on the amount unpaid at the due date, so timely quarterly deposits reduce the exposure even if the return itself is late.

The failure-to-deposit penalty under IRC Section 6656 is tiered by how late the deposit is:17Office of the Law Revision Counsel. 26 USC 6656 – Failure to Make Deposit of Taxes

  • 1 to 5 days late: 2% of the underpayment
  • 6 to 15 days late: 5%
  • More than 15 days late: 10%
  • Still unpaid 10 days after a delinquency notice: 15%

First-time penalty abatement can erase these if your record is clean. You qualify if you filed the same type of return for the prior three years with no penalties during that period (or with any prior penalties removed for a reason other than first-time abatement), and the penalty wasn’t triggered by EFTPS avoidance.18Internal Revenue Service. Administrative Penalty Relief You can request abatement before paying the underlying tax, though interest keeps accruing on any unpaid balance.

Amending After the IRS Accepts Your Return

If you find an error after acceptance — a miscalculated credit, wages assigned to the wrong state, a missed employee — file an amended Form 940 electronically through the same MeF system.5Internal Revenue Service. E-File Employment Tax Forms In your software, check the “Amended Return” box, correct the affected lines, and retransmit. You will get the same acceptance or rejection acknowledgment as the original. File the amendment quickly; delay only increases penalty and interest exposure if the correction produces additional tax owed.