Form 940 and FUTA tax: a do-it-yourself guide

If you run payroll for your own S corporation, you owe federal unemployment tax (FUTA) and you file Form 940 once a year. The form is short, and the math is simple once you know which wages count. This guide covers who files, how to figure the tax, when to deposit, and how to fill out the form yourself.

The figures below come from the IRS instructions for the 2025 Form 940, which is filed in early 2026. Rates, due dates and thresholds can change, so check the current instructions each year.

What FUTA tax is and who pays it

Form 940 reports your annual Federal Unemployment Tax Act (FUTA) tax. Along with state unemployment tax systems, FUTA helps pay unemployment benefits to workers who lose their jobs. According to the Instructions for Form 940, most employers pay both a federal and a state unemployment tax.

Only the employer pays FUTA tax. Don't collect or deduct it from your employees' wages, and that includes your own salary as an owner-employee. It comes out of the company's pocket, not out of anyone's paycheck.

If you're still working out what to pay yourself, see How to pay yourself from an S corporation first. Your salary is what drives your FUTA tax.

Do you have to file Form 940?

For 2025, the IRS says you must file Form 940 if you answer "Yes" to either question:

1. Did you pay wages of $1,500 or more to employees in any calendar quarter during 2024 or 2025?
2. Did you have one or more employees for at least some part of a day in any 20 or more different weeks in 2024 or in 2025? Count full-time, part-time and temporary employees.

Most S corporations that pay their owner a regular salary will meet one of these tests. The IRS examples in the instructions treat corporate officers as employees whose wages count for FUTA.

How FUTA tax is figured

FUTA applies only to the first $7,000 you pay each employee in a calendar year, after you subtract payments exempt from FUTA tax. The IRS calls this $7,000 the FUTA wage base.

For 2025, the FUTA tax rate is 6.0%. Most employers get a credit of up to 5.4% for paying state unemployment tax, which leaves a net rate of 0.6% (IRS Form 940 instructions).

At the 0.6% rate, the most FUTA tax you'd owe for one employee in 2025 is $42 ($7,000 x 0.006). An S corporation with an owner and one employee, each paid at least $7,000, would owe $84 for the year if the full credit applies.

When the full credit doesn't apply

The 5.4% credit depends on paying state unemployment tax. Three situations can raise your FUTA tax:

• Officer wages excluded from state unemployment tax. In certain states, wages paid to corporate officers are excluded from state unemployment tax. If wages subject to FUTA aren't subject to state unemployment tax, you may owe FUTA at the full 6.0% rate on them. Ask your state unemployment agency whether your state excludes officer wages.
• Late state unemployment payments. To get the full credit, pay your state unemployment tax by the Form 940 due date. For 2025, that's February 2, 2026, or February 10, 2026, if that is your Form 940 due date. Late payments earn a reduced credit, which you figure on the line 10 worksheet.
• Credit reduction states. A state that hasn't repaid money it borrowed from the federal government for unemployment benefits is a credit reduction state. The IRS notes that for 2025 there are credit reduction states. If you paid wages subject to one of them, use Schedule A (Form 940). Check the current Schedule A instructions to see which states are on the list.

Note one exception: if you paid no state unemployment tax only because your state assigned you a 0% rate, line 9 does not apply to you.

In Oklahoma, state unemployment tax is reported quarterly to OESC. See Oklahoma OES-3 quarterly unemployment report: how to file with OESC.

When to deposit FUTA tax

You figure your FUTA liability every quarter, but you deposit only when your undeposited amount is more than $500. If it's $500 or less, carry it forward to the next quarter.

For the fourth quarter of 2025, if your FUTA tax (plus any undeposited amounts from earlier quarters) is more than $500, deposit the whole amount by February 2, 2026. If it's $500 or less, you can deposit it or pay it with your Form 940 by February 2, 2026. If any deposit due date falls on a Saturday, Sunday or legal holiday, you may deposit on the next business day.

A small S corporation with only an owner and one or two employees often stays under $500 for the whole year. In that case you may make a single payment at year end. Run the numbers each quarter anyway.

To keep these dates in front of you, use the S-corp payroll calendar or the free payroll deadline calendar.

How to deposit

All federal tax deposits must be made by electronic funds transfer (EFT). The Form 940 instructions list these options:

• The Electronic Federal Tax Payment System (EFTPS), a free service from the Department of the Treasury
• IRS Direct Pay (free)
• Your IRS business tax account (free)

You can also have your financial institution send a same-day wire payment for you. Don't use a credit or debit card to pay taxes that are required to be deposited.

For a walkthrough, see How to make an EFTPS payroll tax deposit. When you deposit FUTA, choose Form 940, not Form 941.

Filling out Form 940, step by step

The IRS encourages electronic filing, but you can file on paper. If you file on paper, the mailing address depends on whether you include a payment, so check the address table in the current instructions.

1. Top of the form. Enter your EIN, name and address. Never use an SSN where the form asks for an EIN. Put your business name and EIN on every page.
2. Part 1. On line 1a, enter the state where you paid state unemployment tax. Check line 2 and fill out Schedule A if you paid wages in a credit reduction state.
3. Line 3. Enter total payments to all employees for the year, even payments that aren't taxable for FUTA.
4. Line 4. Enter payments exempt from FUTA tax and check the boxes for their types. Examples include certain contributions to employee health plans and employer contributions to a qualified retirement plan. Only list a payment here if you also included it on line 3.
5. Line 5. Enter the total paid to each employee above the $7,000 wage base, after subtracting exempt payments.
6. Lines 6 to 8. Add lines 4 and 5 for line 6. Subtract line 6 from line 3 for line 7 (taxable FUTA wages). Multiply line 7 by 0.006 for line 8.
7. Part 3 adjustments. Use line 9 if all taxable FUTA wages were excluded from state unemployment tax. Use line 10 (and its worksheet) if some were excluded or you paid state tax late. Use line 11 for credit reduction. If line 9 applies, leave lines 10 and 11 blank.
8. Part 4. Line 12 is total FUTA tax after adjustments. Line 13 is what you deposited for the year. Line 14 is the balance due, and line 15 is any overpayment. If the balance due is less than $1, you don't have to pay it.
9. Part 5. If line 12 is more than $500, report your liability for each quarter on line 16. Line 17 must equal line 12.
10. Part 7. Fill out both pages and sign. For a corporation, the president, vice president or another principal officer authorized to sign may sign.

Formatting tips from the instructions: don't enter dollar signs, and if you round to whole dollars you must round every entry. Keep the line 10 worksheet with your records rather than attaching it.

If you can't pay in full, the IRS says you may be able to apply for an online installment agreement. You must owe $25,000 or less and be able to pay in full within 24 months. Fees, penalties and interest apply. For more on avoiding these costs, see Payroll tax penalties and how to avoid them.

Quick year-end checklist

• Total each employee's wages for the year, including your own salary.
• Confirm all state unemployment tax was paid by the Form 940 due date.
• Check whether any wages were in a credit reduction state.
• Deposit fourth quarter FUTA if the undeposited total is more than $500.
• Confirm line 17 matches line 12 if you're filling out Part 5.
• Sign, date and file by the due date (February 2, 2026, for tax year 2025).

For the rest of your January filings, use the Year-end payroll checklist for small employers.

Where Selfroll fits

Selfroll is a free payroll calculator for small S-corporation owners. It figures your FUTA liability each quarter, tracks deposit and filing dates in a deadline calendar, and fills a draft Form 940 for you to review. You make the deposits from your own bank and sign and file the return yourself.

Sources

• IRS: Instructions for Form 940 (2025), Employer's Annual Federal Unemployment (FUTA) Tax Return

This guide is general information, not tax or legal advice. Check current IRS, SSA and state rules or ask a CPA.