What is the function of form 940?

Form 940 is specifically used for reporting federal unemployment tax (FUTA) to the IRS. Employers must file this form annually to report their total payroll, the amount of FUTA taxes due, and any credits or reductions that apply. The form helps the IRS track unemployment taxes collected, ensuring that employers are in compliance with the federal requirements for funding state unemployment insurance programs.

This form is essential for maintaining accurate records of unemployment tax liabilities, which are used in the case of unemployment claims by employees. Understanding the role of Form 940 is crucial for payroll professionals, as it relates directly to the employer's responsibilities in the realm of unemployment taxes and workforce management.