Form 940 FUTA Tax Calculator

How Form 940 turns a year of payroll into one tax figure

Form 940 is the annual federal unemployment tax return. Part 2 walks from your total payroll down to the slice of it that FUTA actually touches, and the whole thing hinges on one number per person: the first $7,000 you paid them.

Take the three-person team this page starts with, paid $45,000, $9,000, and $5,200. Line 3 is the total of everything you paid: $59,200. Line 4 is $0 because nothing was exempt. Line 5 is the part of each person's pay above $7,000, worked out one employee at a time: $38,000 plus $2,000 plus $0, which is $40,000. Line 6 adds Lines 4 and 5 for $40,000, Line 7 subtracts that from Line 3 and leaves $19,200 of taxable FUTA wages, and Line 8 multiplies by 0.006 for $115.20 of tax.

Notice what did the work there. Two of the three employees hit the $7,000 cap, so their salaries stopped mattering the moment they crossed it. That is the point most Form 940 guides bury: headcount drives your FUTA bill, not payroll size. Ten people on $200,000 and ten people on $20,000 owe exactly the same $420. It also means a company-wide wage total can never produce a correct Line 5, which is why this page asks for wages per person.

For a single employee at the rate level, including state unemployment tax, use the SUTA & FUTA Employer Tax Calculator. To run an actual payroll across the team with the employer FICA match included, use the Multi-Employee Payroll Calculator, or the Employer Cost Calculator for the fully loaded cost of one hire.

Adjustments on Lines 9, 10, and 11 (and when you actually need them)

Most employers leave all three of these blank, because the 0.6% rate on Line 8 already assumes you got the full 5.4% state credit. Each line exists for a case where that assumption breaks.

Line 9 is the all-or-nothing case: none of your taxable FUTA wages were subject to state unemployment tax. Then you get no credit at all, and Line 9 adds Line 7 times 0.054, taking you to the full statutory 6.0%. Line 10 is the partial case: some wages were excluded from state unemployment tax, or you paid your state tax after the Form 940 due date. That one runs through a worksheet in the IRS instructions that needs per-employee, per-state, per-payment detail, so this page asks for your worksheet result instead of guessing at it.

Line 11 is the credit reduction from Schedule A. When a state carries an outstanding federal unemployment loan, employers there lose part of the 5.4% credit, so the extra tax lands on the same Line 7 base as a separate charge rather than a change to Line 8. The awkward part is timing: the Department of Labor confirms the list in November, after almost a full year of payroll has already run at an assumed 0.6%. An unexpected Form 940 balance in January is usually this. There is one simplification here: this page applies a single reduction rate to all of Line 7. That is exact if you pay wages in one state only, but a multi-state employer files Schedule A with a rate per state.

FUTA deposits, the $500 rule, and the January 31 deadline

FUTA is deposited quarterly, but only once your accumulated undeposited liability passes $500. Deposits are due by the last day of the month after the quarter: April 30, July 31, October 31, and January 31. A quarter that leaves you at or under $500 deposits nothing and rolls forward. So $200 in Q1 and $400 in Q2 means no deposit in April and a $600 deposit by July 31.

The timing surprises people in their first year. Because the wage base is only $7,000, most employees exhaust it by mid-year, so Q1 is usually the biggest quarter and Q4 is often zero. That is also why the estimate button on this page splits Line 12 evenly only as a rough starting point: your payroll records are the real source for Lines 16a through 16d.

Q4 is not an exception to the threshold. If your Q4 liability plus any carryover comes to more than $500, it is a deposit due January 31, not an amount you can pay with the return. Only a year-end remainder of $500 or less can go with Form 940. Once deposits are in, Line 13 subtracts from Line 12 to give either a Line 14 balance due or a Line 15 overpayment, never both. And if you deposited everything on time and in full, the filing deadline moves from January 31 to February 10. For the quarterly counterpart covering withholding and FICA, see the Form 941 Tax Calculator.

Checking your Form 940 against your payroll records

Three reconciliations catch nearly every Form 940 error. Line 3 should tie back to total gross wages on your W-2 and W-3 totals, adjusted for the FUTA-specific exclusions. Line 5 should equal the sum of each employee's excess over $7,000, calculated one person at a time, never from an average. And Lines 16a through 16d should add up to Line 12, which is the check the form itself asks you to make in Part 5.

If the per-employee ledger on this page took some digging to fill in, that is the real problem, not the arithmetic. Tracking year-to-date FUTA wages per person as you run payroll is far easier than reconstructing a full year of them in January. The WorkLogs44 Payroll Calculator app keeps per-employee wage-base totals for FUTA and state unemployment tax as you go, so the figures Form 940 wants are already sitting there when the return is due.

This page is an estimator built from the IRS Instructions for Form 940 and Publication 15. File from your own payroll records, and check Schedule A if you paid wages in more than one state.