Get IRS 940 2022-2024

The Federal Unemployment Tax Act (FUTA), authorizes the Internal Revenue Service(IRS) to collect a Federal employer tax used to fund state workforce agencies. Employers pay this tax annually by filing IRS Form 940.

As a result, employers in these states are not subject to a FUTA credit reduction for 2022. California, Connecticut, Illinois, and New York did not repay their outstanding advances before November 10, 2022. Therefore, employers in these states are subject to a FUTA credit reduction of 0.3 percent for 2022.

FUTA tax rate: The FUTA tax rate is 6.0%. The tax applies to the first $7,000 you paid to each employee as wages during the year.

The two IRS forms are similar. However, Form 940 is filed annually and it only reports an employer's FUTA taxes. Form 941, on the other hand, reports federal income tax withholding and Federal Insurance (FICA) taxes—and it's filed every quarter.

As such, XYZ Sample Company's FUTA tax due on each employee's wages paid in 2022 would be $42 ($7,000 x 0.6%), or a total of $4,200 ($42 x 100). Because California is subject to the credit reduction, the FUTA tax owed per employee is $63 ($7,000 x 0.9%).

These states already have a credit reduction of 0.3% for 2022 and may face a credit reduction of 0.6% for 2023: California, Connecticut, Illinois, and New York. The U.S. Virgin Islands also faces a potential credit reduction of 4.8%. The determination will be made after November 10, 2023.