Instructions for Form 940 - Introductory Material

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Credit reduction state.   A state that has not repaid money it borrowed from the federal government to pay unemployment benefits is a “credit reduction state.” The Department of Labor determines these states. If an employer pays wages that are subject to the unemployment tax laws of a credit reduction state, that employer must pay additional federal unemployment tax when filing its Form 940.

  For 2014, there are credit reduction states. If you paid any wages that are subject to the unemployment compensation laws of a credit reduction state, your credit against federal unemployment tax will be reduced based on the credit reduction rate for that credit reduction state. Use Schedule A (Form 940), Multi-State Employer and Credit Reduction Information, to figure the credit reduction. For more information, see the Schedule A (Form 940) instructions or visit

Online payment agreement.   You may be eligible to apply for an installment agreement online if you have a balance due when you file your return. For more information, see What if you cannot pay in full, later.


If you change your business name, business address, or responsible party.   For a definition of “responsible party” and how to notify IRS of a change in the identity of your responsible party, see the Form 8822-B instructions. Notify the IRS immediately if you change your business name, business address, or responsible party. Write to the IRS office where you file your returns (using the Without a payment address under Where Do You File, later) to notify the IRS of any name change. See Pub. 1635, Employer Identification Number: Understanding Your EIN, to see if you need to apply for a new EIN. Complete and mail Form 8822-B, Change of Address or Responsible Party—Business, to notify the IRS of an address change.

Federal tax deposits must be made by electronic funds transfer (EFT).   You must use EFT to make all federal tax deposits. Generally, an EFT is made using the Electronic Federal Tax Payment System (EFTPS). If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPS is a free service provided by the Department of Treasury. Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee.

  For more information on making federal tax deposits, see section 11 of Pub. 15 (Circular E), Employer's Tax Guide. To get more information about EFTPS or to enroll in EFTPS, visit, or call 1-800-555-4477, 1-800-733-4829 (TDD), or 1-800-244-4829 (Spanish). Additional information about EFTPS is also available in Pub. 966, Electronic Federal Tax Payment System: A Guide To Getting Started.

Aggregate Form 940 filers.   Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940. Aggregate Forms 940 are filed by agents of home care service recipients approved by the IRS under section 3504 of the Internal Revenue Code. To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS unless you are a state or local government agency acting as agent under the special procedures provided in Rev. Proc. 2013-39, 2013-52 I.R.B. 830, available at

Disregarded entities and qualified subchapter S subsidiaries (QSubs).   Business entities that are disregarded as separate from their owner, including qualified subchapter S subsidiaries, are required to withhold and pay employment taxes and file employment tax returns using the name and employer identification number (EIN) of the disregarded entity. For more information, see Disregarded entities, later.

State unemployment information.   When you registered as an employer with your state, the state assigned you a state reporting number. If you do not have a state unemployment account and state experience tax rate, or if you have questions about your state account, you must contact your state unemployment agency. For a list of state unemployment agencies, visit the U.S. Department of Labor's website at

You can file and pay electronically.   Using electronic options available from the IRS can make filing a return and paying your federal tax easier. You can use IRS e-file to file a return and EFTPS to make deposits or pay in full whether you rely on a tax professional or prepare your own taxes.
  • For e-file, visit the IRS website at for additional information.

  • For EFTPS, visit, or call EFTPS Customer Service at 1-800-555-4477, 1-800-733-4829 (TDD), or 1-800-244-4829 (Spanish).

Electronic funds withdrawal (EFW).   If you file Form 940 electronically, you can e-file and e-pay (EFW) the balance due in a single step using tax preparation software or through a tax professional. However, do not use EFW to make federal tax deposits. For more information on paying your taxes using EFW, visit the IRS website at A fee may be charged to file electronically.

You can pay your balance due by credit or debit card.   You may pay your FUTA tax shown on line 14 using a credit card or debit card. However, do not use a credit or debit card to pay taxes that are required to be deposited (see When Must You Deposit Your FUTA Tax, later). For more information on paying your taxes with a credit or debit card, visit the IRS website at

Outsourcing payroll duties.   Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. The employer remains responsible if the third party fails to perform any required action. If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer, such as a payroll service provider or reporting agent, visit and enter “outsourcing payroll duties” in the search box for helpful information on this topic.

Photographs of missing children.   The IRS is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

How Can You Get More Help?

If you want more information about this form, see Pub. 15 (Circular E), visit our website at, or call the Business and Specialty Tax Line toll free at 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) Monday–Friday from 7:00 a.m.–7:00 p.m. local time (Alaska and Hawaii follow Pacific time).

For a list of related employment tax topics, visit and enter “employment taxes” in the search box. You can order forms, instructions, and publications at or by calling 1-800-TAX-FORM (1-800-829-3676).

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