Form 940 and FUTA Tax for 2026: Who Owes It, the $42 Math, Deposits and the February 1, 2027 Deadline

By Web Asset House Studio · October 29, 2026

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How we wrote this: A summary of IRS Publication 15 (2026), the IRS "About Form 940" page and Tax Topic 759, the Instructions for Form 940 (2025), the IRS FUTA credit reduction page and the U.S. Department of Labor's FUTA credit reduction page (all linked below), checked October 29, 2026. The 2026 Form 940 instructions weren't out yet; the 2026 dates below apply the IRS's weekend rule to the January 31 due date. General information, not tax advice.

If you have employees, you probably file a quarterly Form 941 for income tax withholding, Social Security and Medicare. Form 940 is its once-a-year companion for the federal unemployment tax (FUTA). It's usually a small amount of money, but it has its own tests, deposit rule and deadline.

The rate and the $7,000 wage base

From Publication 15 (2026):

The FUTA tax rate for 2026 is 6.0%.
It applies only to the first $7,000 you pay each employee in the year (the federal wage base). Your state's wage base can differ.
You can generally take a credit of up to 5.4% for state unemployment tax you paid, which leaves a net rate of 0.6%.

With the full credit, the most FUTA tax you owe for one employee is $7,000 × 0.6% = $42 a year. Five employees who each earn more than $7,000 means $210.

You get the full credit only if you paid your state unemployment tax in full, on time (by the Form 940 due date) and on all the same wages that are subject to FUTA, and your state isn't a credit reduction state (below). Some states exclude certain pay from state unemployment tax even though FUTA covers it (the IRS's examples include wages paid to corporate officers); FUTA on that pay can run as high as the full 6.0%.

Only employers pay FUTA. Don't withhold it from paychecks.

Do you have to file?

Under the general test in Publication 15, you're subject to FUTA tax in 2026 if either is true:

you paid wages of $1,500 or more in any calendar quarter in 2025 or 2026, or
you had at least one employee for some part of a day in 20 or more different weeks in 2025 or in 2026.

Full-time, part-time and temporary employees all count. A partnership doesn't count its partners. Separate tests apply to household employees ($1,000 or more in cash wages in any quarter of 2025 or 2026) and farmworkers ($20,000 in cash wages in a quarter, or 10 or more farmworkers in 20 different weeks).

Family employees

Publication 15 has a few exceptions that matter to family businesses:

Pay to your child under 21 who works for you (the parent) isn't subject to FUTA tax.
Pay to your spouse for work in your trade or business is subject to income tax withholding, Social Security and Medicare, but not FUTA.
These exceptions don't apply if the family member works for a corporation, or for a partnership (unless, for a child, every partner is the child's parent), even one you control.

Deposits: the $500 rule

You figure FUTA tax each quarter:

If the amount for the quarter (plus anything carried over) is over $500, deposit it by the last day of the month after the quarter ends.
If it's $500 or less, carry it forward to the next quarter.
Deposits are made electronically: through your IRS business tax account, IRS Direct Pay for businesses, or EFTPS.
Stop counting an employee's wages once they reach $7,000 for the year.

For a business with only a few employees, the 0.6% rate means the $500 threshold often isn't reached until late in the year, if at all. When a deposit date falls on a weekend or legal holiday, you can deposit on the next business day. October 31, 2026 is a Saturday, so a third-quarter 2026 deposit can be made on Monday, November 2, 2026.

Credit reduction states

If a state borrowed from the federal government to pay unemployment benefits and hasn't repaid it in time, employers there get a smaller credit. The IRS explains the timeline: a state that has an outstanding loan balance on January 1 of two consecutive years and doesn't repay it by November 10 of the second year becomes a credit reduction state. The reduction starts at 0.3% and grows by another 0.3% each year, with possible add-ons. The Department of Labor determines the list.

For 2025, the Labor Department's table shows two: California (1.2%) and the U.S. Virgin Islands (4.5%).
Its list of potential 2026 credit reductions names the same two. The final 2026 list comes after the November 10, 2026 repayment deadline, so check the Labor Department page before you file.

Any extra tax from a credit reduction counts as a fourth-quarter liability and is due with the fourth-quarter deposit. You report it on Schedule A (Form 940), which you also file if you paid state unemployment tax in more than one state.

Deadlines for the 2026 Form 940

Item	Rule	2026 return
Fourth-quarter deposit (if over $500)	January 31	Monday, February 1, 2027 (January 31 is a Sunday)
File Form 940	January 31, or February 10 if every deposit was made on time	February 1, 2027, or February 10, 2027

For comparison, the 2025 Form 940 instructions gave February 2, 2026 and February 10, 2026 for last year's return, the same weekend adjustment. Form 940 can be e-filed.