IRS Form 940 vs. 941: Key Differences, Deadlines, and Penalties

Written by Sam Brotman, J.D., LL.M. (Taxation), MBA — Managing Attorney, Brotman Law  ·  Updated May 2026

The Short Version: 940 vs. 941 at a Glance

Form 940 and Form 941 are both employer payroll tax forms, but they cover different taxes and run on different schedules.

Form 940 is your annual Federal Unemployment Tax Act (FUTA) return. You file it once a year by January 31. It covers only the employer's share of federal unemployment tax — employees never pay FUTA, and it does not appear on their W-2 as a withholding.

Form 941 is your quarterly employment tax return. You file it four times a year. It accounts for wages paid, federal income tax withheld from those wages, and the Social Security and Medicare taxes (called FICA) that both you and your employees owe. This is where the bulk of your payroll tax liability lives — and where the most serious enforcement action happens.

The rest of this guide covers each form in detail: what it covers, when it's due, where to mail it, how deposits work, and what the penalties look like when something goes wrong.

What Is Form 940 (FUTA)?

Under the Federal Unemployment Tax Act (FUTA), employers pay a tax on the first $7,000 of each employee's wages. The standard FUTA rate is 6.0%, but most employers receive a 5.4% credit for timely state unemployment tax (SUTA) payments — bringing the effective federal rate down to 0.6%. That credit is not automatic if your state borrowed from the federal unemployment fund and hasn't repaid it; credit reduction states reduce the 5.4% credit for employers in those states.

A few points that trip people up:

• FUTA is an employer-only tax. You do not withhold it from employee paychecks. The full cost is yours.
• The $7,000 wage base applies per employee per year. Once an employee earns $7,000, no further FUTA applies to their wages for that year.
• Deposits may be required during the year. If your FUTA liability exceeds $500 in any calendar quarter, you must deposit that amount by the last day of the month following the quarter. The annual Form 940 then reconciles those deposits to your final liability.
• Seasonal employers who did not pay wages in every calendar quarter can still file one Form 940 for the year — but they must check Box 2 on the form.

Form 940 Due Date

Form 940 is due January 31 of the year following the tax year. So Form 940 for 2025 wages is due January 31, 2026. If you deposited all FUTA taxes on time during the year, the IRS gives you a 10-day extension — making the effective deadline February 10, though this extension is not something you apply for, it's automatic.

What Is Form 941 (Employer's Quarterly Federal Tax Return)?

Form 941 covers four separate obligations in a single filing:

1. Wages and tips paid during the quarter — the total compensation subject to federal employment taxes.
2. Federal income tax withheld from employee wages — the amount you held back from paychecks and are now remitting to the IRS.
3. Employee share of Social Security and Medicare taxes — withheld from employee wages at 6.2% (Social Security, up to the annual wage base) and 1.45% (Medicare, no wage cap).
4. Employer share of Social Security and Medicare taxes — your matching contribution: 6.2% Social Security and 1.45% Medicare per employee.

The employee and employer Social Security and Medicare amounts are reported together on Form 941. The combined rate is 15.3% of wages: 12.4% for Social Security (split evenly) and 2.9% for Medicare (split evenly). High-earning employees also trigger Additional Medicare Tax of 0.9% on wages above $200,000 — employers withhold this but do not match it.

Form 941 Due Dates

Form 941 is due on the last day of the month following the end of each quarter. The four deadlines are:

• Q1 (January–March) — April 30
• Q2 (April–June) — July 31
• Q3 (July–September) — October 31
• Q4 (October–December) — January 31

If you deposited all employment taxes for the quarter on time, you get an automatic 10-day extension on the filing deadline — same rule as Form 940. When a deadline falls on a weekend or federal holiday, it moves to the next business day.

Key Differences: Side-by-Side Comparison

Here's the 940 vs. 941 comparison in one table:

Where to Mail Form 940

The IRS publishes the complete state-by-state mailing table in the Form 940 instructions each year. The addresses below reflect the current 2026 guidance. If you're filing electronically through EFTPS or e-file, the mailing question doesn't apply.

Form 940 Mailing Addresses — Without Payment

Form 940 Mailing Addresses — With Payment

One practical note: the IRS recommends electronic filing and EFTPS deposits for all employment tax forms. If you're still mailing paper returns, make sure you're using the current year's instructions — the addresses change occasionally and an outdated address is a common reason returns get delayed or lost.

Form 941 Deposit Schedules: Monthly vs. Semi-Weekly

The lookback period for calendar year 2026 is July 1, 2024 through June 30, 2025. If you reported $50,000 or less in employment taxes during that period, you're a monthly depositor. If you reported more than $50,000, you're a semi-weekly depositor.

New employers start as monthly depositors regardless of their payroll size.

The $100,000 next-day rule overrides your normal schedule. If your liability accumulates to $100,000 on any single day — regardless of whether you're a monthly or semi-weekly depositor — you must deposit by the next business day. Once that happens, you become a semi-weekly depositor for the remainder of the year and the following calendar year.

Deposits must go through EFTPS (Electronic Federal Tax Payment System). Paper deposits via Form 8109 have not been accepted since 2011. If you're still writing checks to the IRS for payroll taxes, your payroll provider or accountant should be handling EFTPS for you — and it's worth confirming they are.

Common Mistakes with Form 940 and Form 941

Most of the problems we see aren't from employers who ignored their obligations — they're from employers who thought they were handling it correctly. A few patterns come up repeatedly:

Late or Missed Deposits

The most common problem. Employers running tight on cash sometimes delay payroll tax deposits with the intention of catching up. The IRS's failure-to-deposit penalty starts at 2% and can reach 15% relatively quickly — and it applies to each deposit period, not just to the year-end balance. A pattern of late deposits over several quarters can accumulate into a serious liability before anyone realizes how large it's gotten.

Incorrect Deposit Amounts

Semi-weekly depositors sometimes deposit based on what they think they owe rather than the actual accumulated liability. If you're on the semi-weekly schedule and your payroll varies week to week, you need to calculate each deposit based on actual wages paid in that period — not an estimate.

Misapplied Deposits

When a business is behind, the IRS applies incoming payments to the oldest outstanding liability first — which may not be where the taxpayer intended. If you have outstanding balances across multiple quarters, a payment made today may not reduce the current quarter's liability at all. This creates an expanding balance on the current quarter while you believe you've addressed the problem.

Missing the Form 940 Filing Entirely

Some small employers forget that Form 940 exists because their payroll software handles 941 automatically but doesn't prompt them on the annual FUTA return. If you didn't get a notice from the IRS, that doesn't mean the obligation doesn't exist — it means they haven't caught it yet.

Wrong FUTA Rate Due to Credit Reduction

If your state is a credit reduction state — meaning it borrowed from the federal unemployment fund and hasn't fully repaid it — your effective FUTA rate is higher than 0.6%. The IRS publishes the credit reduction list each November. California was a credit reduction state for several years and the adjustment can be meaningful for high-wage employers.

Penalties: Failure to Deposit, Failure to File, and the Trust Fund Recovery Penalty

Failure-to-Deposit Penalty (Form 941)

The failure-to-deposit penalty under IRC § 6656 is tiered by how many days late the deposit is:

These rates are per deposit period and stack across quarters. An employer who runs three months behind can be looking at a 15% penalty on each missed deposit period before the first IRS notice arrives.

Failure-to-File Penalty

For both Form 940 and Form 941, the failure-to-file penalty is 5% of the unpaid tax per month (or part of a month) the return is late, up to a maximum of 25%. If the return is more than 60 days late, the minimum penalty is the lesser of $485 (2026 figure, adjusted for inflation) or 100% of the unpaid tax.

The failure-to-file and failure-to-deposit penalties are separate. Both can apply simultaneously to the same unpaid balance.

The Trust Fund Recovery Penalty (TFRP)

Here's the mechanics: when you withhold federal income tax, Social Security, and Medicare from employee paychecks, those funds are held in trust for the government. They are not your money. If the business fails to remit those funds to the IRS, the IRS can pursue the people who were responsible for making the payments and chose not to.

The TFRP equals 100% of the unpaid trust fund taxes — the employee portion of FICA plus withheld income tax. It can be assessed against any "responsible person" who "willfully" failed to remit. The IRS interprets both of those terms broadly:

• Responsible person includes business owners, officers, directors, and anyone with authority to sign checks or make financial decisions — but it can also include bookkeepers, outside accountants, and payroll service providers who had authority over tax deposits.
• Willfully does not require intent to defraud. The IRS takes the position that paying other creditors while knowing payroll taxes are unpaid satisfies the willfulness standard. You do not have to know the TFRP exists to be subject to it.

The TFRP is assessed against individuals personally. It survives corporate bankruptcy. It appears on personal credit reports. It can result in personal tax liens and levies. We handle these cases regularly — and the earlier we get involved, the more options exist for contesting the assessment or negotiating the resolution.

What to Do If You're Behind on 941 Deposits

The short version is that the problem compounds the longer it goes unaddressed. The practical steps depend on how far behind you are.

If You're One to Two Quarters Behind

This is still manageable. File any missing returns now — the failure-to-file penalty and failure-to-deposit penalty both accrue from the due date, not from when the IRS notices. Filing late, even without full payment, stops the failure-to-file clock.

If you can pay the balance in full, do it. If you can't, an installment agreement with the IRS is available for employment tax balances — but the IRS will want to confirm you are current on all new deposits before they'll approve ongoing payments on old ones. You cannot get on a payment plan for old quarters while continuing to fall behind on new ones.

If You're Three or More Quarters Behind, or a Revenue Officer Has Been Assigned

Once the balance is substantial enough that the IRS assigns a revenue officer — a field collection agent — the situation has escalated beyond what most business owners can manage through the IRS's self-service channels. A revenue officer has authority to issue levies, file Federal Tax Liens, and begin the TFRP investigation against responsible persons.

At this point, the most useful thing you can do is make sure you are fully current on all new deposits going forward and get counsel involved before your next interaction with the revenue officer. The revenue officer is not there to help you resolve the problem — they are there to collect.

First-Time Penalty Abatement

If your business has a clean compliance history — no penalties in the three prior years — you may qualify for first-time penalty abatement on the failure-to-deposit and failure-to-file penalties. This does not reduce the underlying tax or interest, but on a large balance the penalty reduction can be meaningful. Abatement requests go through the IRS's automated penalty abatement system or, if denied, through an appeal.

When You Need a Tax Attorney

Most 940 and 941 issues — a single late filing, a missed deposit, a CP162 notice — are administrative. A good CPA or payroll professional can handle them.

Two situations move beyond that:

Trust Fund Recovery Penalty Investigation

When the IRS opens a TFRP investigation, a revenue officer will typically send Form 4180 — the "Interview of Responsible Individual" questionnaire — and ask to meet with you. Your answers to that form determine whether you are assessed. You have the right to have an attorney present. You also have the right not to answer questions that could incriminate you in a criminal matter.

The TFRP interview is not an audit. It is a collection enforcement action, and what you say in it can result in a personal assessment that follows you regardless of what happens to the business. If you've received a Form 4180, or if a revenue officer has mentioned the TFRP in conversation, that's the point to call us.

Revenue Officer Involvement with Significant Balances

If a revenue officer has been assigned and the balance is large enough that they're discussing liens, levies, or personal liability, the negotiation looks different than a straightforward installment agreement request. The revenue officer's job is collection — not resolution — and the tools available to a taxpayer represented by counsel are different from those available to someone dealing with the IRS directly.

We handle payroll tax cases at every stage — from first-notice response to TFRP defense to negotiated resolutions with outstanding balances. If you want to understand where you stand, a 15-minute call is a reasonable place to start.