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IRS Form 940 vs. 941: What Employers Need to Know
Form 941 is the quarterly return for income tax withholding and Social Security and Medicare; Form 940 is the annual return for FUTA, paid only by the employer and never withheld from wages. The two run on separate deposit clocks and separate due dates. BEG prepares, files, and reconciles both from your payroll system at $45 per employee monthly.
940 and 941, side by side
| Form 941 | Form 940 | |
|---|---|---|
| Reports | Federal income tax withheld, employee and employer Social Security and Medicare | FUTA, the federal unemployment tax |
| Who pays | Employee and employer share both | Employer only, never withheld from wages |
| Filing frequency | Quarterly | Annual |
| Due dates | April 30, July 31, October 31, January 31 | January 31 (February 10 if deposits were timely) |
| Deposit clock | Monthly or semiweekly, by the lookback rules | Quarterly, only once liability passes $500 |
Why they are structured so differently
Form 941 exists because federal income tax withholding and FICA are collected continuously, on every paycheck, and reported to the IRS every quarter. Form 940 exists for a completely different tax: FUTA is an employer-only obligation that funds the federal side of the unemployment insurance system, and because it applies only to the first $7,000 of each employee's wages for the year, an annual return is enough to true it up. Different purpose, different rhythm, different form.
941 due dates land the month after each quarter closes, with an extension to the 10th of the second month for an employer that made every deposit on time. Form 940's due date is January 31, or February 10 under the same timely-deposit extension.
The mistake: assuming a small 941 balance means no separate FUTA deposit
A quarterly 941 liability under $2,500 can be paid with the return itself instead of deposited separately. That rule has nothing to do with FUTA, but employers frequently assume it does, and skip a FUTA deposit that was actually due. FUTA still requires its own electronic deposit for any quarter where cumulative liability crosses $500, on its own separate deposit clock, regardless of how the 941 balance looks that same quarter.
A credit reduction state adds a further wrinkle. California carries a 1.2 percent credit reduction on the 2025 Form 940, and that extra tax is treated as incurred entirely in the fourth quarter, via Schedule A, rather than spread evenly across the year. Schedule A itself is required for any employer that paid state unemployment tax in more than one state, whether or not a reduction applies that year.
What BEG reconciles at year end
BEG prepares and files both returns from the client's payroll system, reconciles the four quarterly 941 filings against the W-2 totals at year end, files Schedule A with the 940 for clients with wages in more than one state, and makes the deposits behind both returns on the client's schedule. Signing authority, funding, and any amended-return dispute with the IRS stay with the client and its CPA.
Full BEG managed payroll keeps both filings current every quarter as a standard part of the service.
Managed Payroll, Handled.
BEG manages payroll at $45 per employee per month, all-inclusive. Get an instant cost comparison for your business.
Frequently Asked Questions
What is the core difference between Form 940 and Form 941?
Form 941 is filed quarterly and reports federal income tax withheld, employee Social Security and Medicare withheld, and the employer share of Social Security and Medicare. Form 940 is filed annually and reports FUTA, a tax only the employer pays and one that is never deducted from an employee’s wages.
When is Form 941 due?
April 30, July 31, October 31, and January 31, covering the preceding quarter. An employer that deposited every payment on time gets an extension to the 10th of the second month after the quarter closes.
When is Form 940 due?
January 31, or February 10 if all FUTA deposits were made when due during the year.
Do Form 940 and Form 941 use the same deposit schedule?
No. Form 941 taxes are deposited monthly or semiweekly under the lookback rules, while FUTA is deposited quarterly, and only once cumulative liability for the year passes $500. They run on entirely separate clocks.
If my quarterly 941 balance is small, do I still owe a separate FUTA deposit?
Often yes, and this is the most common mistake. Under $2,500 of quarterly 941 tax can be paid with the return instead of deposited, but FUTA still requires its own electronic deposit for any quarter where cumulative liability crosses $500, regardless of how small the 941 balance looks.
Does a credit reduction state change the Form 940 amount?
Yes. A credit reduction state, California at 1.2 percent for the 2025 Form 940, raises the fourth-quarter FUTA amount specifically, since the extra tax from a credit reduction is treated as incurred in the fourth quarter rather than spread across the year.
Does BEG check that Form 941 filings match the year-end W-2s?
Yes. BEG reconciles the four quarterly 941 filings against the W-2 totals at year end, which is where a mid-year correction or missed adjustment would otherwise surface as a mismatch.
Does every multi-state employer need Schedule A with Form 940?
Yes. Schedule A (Form 940) is required for any employer that paid state unemployment tax in more than one state during the year, even in states carrying no credit reduction that year.
What does BEG handle on Form 940 and Form 941?
BEG prepares and files both returns from the client's payroll system, reconciles the 941s to the W-2s at year end, files Schedule A with the 940 for multi-state clients, and makes the deposits behind both returns on the client's schedule, all inside standard managed payroll at $45 per employee monthly.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Sources: IRS, About Form 941; IRS, About Form 940; IRS, Instructions for Form 941; IRS Tax Topic 759; IRS Tax Topic 757; IRS, Schedule A (Form 940). This is general tax information, not tax or legal advice.
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