Form 940 vs 941: What Every Employer Needs to Know

Form 940 is an annual filing for federal unemployment (FUTA) tax, paid only by the employer. Form 941 is a quarterly filing for federal income tax withholding, Social Security, and Medicare. Most employers with W-2 employees are required to file both.

If you have employees on U.S. payroll, you can expect two forms from the IRS every year: Form 940 and Form 941. You cannot substitute one for the other, and mixing them can cause big issues. One is yearly, and the other is quarterly, and they will both report different taxes with different deadlines.

This is a common issue for first-time business owners. They file one, thinking it will be enough, and a few months later, they are greeted by the IRS.
To help you better understand the differences, here is a breakdown of each: when they are due, the taxes reported, how much each will cost you, and the common mistakes to watch out for.

What Is the Difference Between Form 940 and 941?

Form 940 is an annual tax filing for FUTA, or Federal Unemployment Taxes. Form 941 is the quarterly tax filing for federal income, Social Security, and Medicare payroll taxes.

The taxes each form covers are completely separate. Form 940 covers a tax that the employer pays. Form 941 covers taxes that both the employer and the employee pay: federal income tax, Social Security, and Medicare.

	Form 940	Form 941
Tax type	Federal Unemployment (FUTA)	Federal income tax, Social Security, Medicare (FICA)
Filing frequency	Annual	Quarterly
Who pays	Employer only	Employer + employee
Primary deadline	January 31	April 30, July 31, October 31, January 31
Applies to wages up to	$7,000 per employee	No wage cap for Medicare; $184,500 for Social Security (2026)

​Form 940: The Annual FUTA Return

Form 940 is a reporting form for employers to pay the FUTA tax to the IRS. The tax is applied to the first $7,000 of the employee’s wages for the year.

The gross FUTA tax is 6% of the first $7,000 of each employee’s wages. After the available tax credits, most employers will owe 0.6% of that amount, which comes out to $42 per employee per year. The reduction of that tax is a benefit for employers who pay state unemployment tax (SUTA) on time. If employers pay SUTA taxes late or if the state is in a federal tax credit reduction, the effective FUTA tax will increase.

Who needs to file Form 940?

You must file if you paid $1,500 or more in wages in a calendar quarter, or you had one or more employees for at least part of any day in 20 or more calendar weeks during the year. Those weeks do not have to be consecutive.

Deposit schedule for Form 940:

Payments are not made when the forms are submitted. The cumulative tax liability is evaluated quarterly. Payments are made when the liability exceeds $500. The FUTA tax must be calculated and paid by the last day of the following month if the cumulative unpaid tax is $500 or more. If the total FUTA tax is less than $500, payment is not made, and that tax liability carries over to the next quarter.

Filing deadline for Form 940:

Form 940 is due on January 31 of the year following the end of the calendar year. If the full FUTA tax liability is paid and all payments are made on time, the due date is extended to February 10. There is no automatic extension of time to file the return.

Penalties for late filing:

Tax returns filed late incur a penalty of 5% of the tax liability for each month the liability remains unpaid, up to a total of 25%. If the return is more than 60 days late, the minimum penalty is $435. Separate penalties for failing to deposit the tax on time also apply. These penalties range from 2% to 15% of the tax liability, depending on how late the deposit is.

Form 941: The Quarterly Payroll Return

Employees’ tax withholdings, Social Security, and Medicare, as well as employer payroll taxes, are reported on Form 941. Employers must complete this form every quarter. The due dates are April 30, July 31, October 31, and January 31.

If employers report taxes for any quarter, they must file Form 941 for every quarter, even if no taxes are due. Employers remain in this system until they notify the IRS that they have stopped paying employees.

Deposit schedule for Form 941:

There are monthly and semiweekly deposit schedules based on your lookback period. The 2025 lookback period is July 1, 2023, to June 30, 2024. If you reported payroll taxes under $50,000, you deposit monthly. If you reported payroll taxes over $50,000, you deposit semiweekly.

If you are a new employer with no lookback history, you start on the monthly schedule by default.

If you are a monthly depositor and reported a $100,000 tax liability on any single day, you must deposit on the semiweekly schedule for the rest of the calendar year.

The Social Security wage base for tax year 2026 is $184,500. The Social Security and Medicare tax rate for both the employee and the employer is 1.45%.

Which Do You Need to File: Form 940 vs 941?

Most employers must file both Form 940 and Form 941 to meet IRS payroll tax obligations.

There are a few exceptions. Form 940 does not have to be filed if annual wages were paid at less than $1,500 or if employees were not hired for 20 or more weeks during the year. Employers who are seasonal or classified as household employers and paid less than $1,000 in wages may file Form 944 in place of Form 941.

Form 944 is the annual version of the quarterly Form 941. Certain small employers whose annual liability for Social Security, Medicare, and withholding of federal income tax is $1,000 or less may complete Form 944 instead. The IRS will notify employers if they qualify, and they may not elect to switch on their own.

Common Mistakes That Lead to IRS Notices

On Form 940:

Claiming the state unemployment tax (SUTA) credit is a common issue. Employers must pay SUTA on time to claim the full 5.4% FUTA credit, and paying in full after the due date will not satisfy the requirement. This is common for employers that let SUTA accounts fall behind and pay in full during Q4 or the first month of Q1 of the following year.

Employers that have employees working in more than one state are required to complete and submit Schedule A, regardless of whether a credit reduction state is involved. This is a frequent oversight for multi-state employers.

On Form 941:

A common mistake that can incur a penalty and lead to processing delays is entering the wrong Employer Identification Number (EIN). The EIN entered must match exactly what is listed in IRS records.

The amount reported on Line 16 of Form 941 is for the tax liability for the month, not the amount deposited. Confusing the two will lead to average failure-to-deposit penalties.

For non-resident founders operating a U.S. LLC or corporation, the EIN must be active and correct before either form can be submitted. We have seen many Form 941 submissions rejected for filing with an EIN that is either incorrect or pending.

Form 940 vs 941: Key Filing Deadlines at a Glance

Deadline	Form	What It Covers
April 30	Form 941	Q1 (Jan-Mar) payroll taxes
July 31	Form 941	Q2 (Apr-Jun) payroll taxes
October 31	Form 941	Q3 (Jul-Sep) payroll taxes
January 31	Form 941 + Form 940	Q4 payroll taxes + annual FUTA
February 10	Form 940 (extended)	Only if all FUTA deposits were timely

All tax payments must be made through EFTPS (Electronic Federal Tax Payment System). While it is technically possible to pay by paper check, it is strongly discouraged for businesses that run regular payroll.

FAQ

Can a sole proprietor with no employees disregard either form?

Yes. Both Forms 940 and 941 are only for employers. If you do not have any W-2 employees, neither form applies to you. You will report self-employment tax on Schedule SE with your Form 1040.

What happens if I hire an employee mid-year?

You will begin filing Form 941 for the quarter in which you first start paying employees. For Form 940, the annual test still requires you to count wages and weeks starting January 1, regardless of when you first hired.

Does a single-member LLC need to file these forms?

Yes, if the LLC has W-2 employees. Payroll tax obligations do not change based on entity type. A single-member LLC with employees, classified as a disregarded entity, is still required to pay FUTA and file quarterly employment tax returns.

What is the penalty for filing Form 941 late?

The late filing penalty starts at 5% of the unpaid tax for each month, with a maximum of 25% plus interest. A late tax payment will incur a penalty of 0.5% per month on the unpaid balance.

Before you can file Form 940 or Form 941, you need an active EIN and a properly formed U.S. entity. That is where most non-resident founders run into delays. At EasyFiling, we handle U.S. LLC and corporation formations, EIN applications, and compliance filings, such as BOI reports, for founders in 175+ countries. Getting the foundation right means your payroll obligations start on solid ground. If you are still setting up your U.S. business structure, start with our formation and EIN services before your first payroll run.