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2020Instructions for Form 940Department of the TreasuryInternal Revenue ServiceEmployer's Annual Federal Unemployment (FUTA) Tax ReturnSection references are to the Internal Revenue Codeunless otherwise noted.Future DevelopmentsFor the latest information about developments related toForm 940 and its instructions, such as legislation enactedafter they were published, go to IRS.gov/Form940.What's NewCredit reduction state. A state that hasn't repaid moneyit borrowed from the federal government to payunemployment benefits is a “credit reduction state.” TheDepartment of Labor determines these states. If anemployer pays wages that are subject to theunemployment tax laws of a credit reduction state, thatemployer must pay additional federal unemployment taxwhen filing its Form 940.For 2020, the U.S. Virgin Islands (USVI) is the onlycredit reduction state. If you paid any wages that aresubject to the unemployment compensation laws of theUSVI, your credit against federal unemployment tax willbe reduced based on the credit reduction rate for theUSVI. Use Schedule A (Form 940) to figure the creditreduction. For more information, see the Schedule A(Form 940) instructions or visit IRS.gov.RemindersMoving expense and bicycle commuting reimbursements are subject to FUTA tax. The Tax Cuts and JobsAct (P.L. 115-97) suspends the exclusion for qualifiedmoving expense reimbursements from your employee'sincome under section 132 and the deduction from theemployee's income under section 217, as well as theexclusion for qualified bicycle commuting reimbursementsfrom your employee's income under section 132,beginning after 2017 and before 2026. Therefore, movingexpense and bicycle commuting reimbursements aren'texempt from FUTA tax during this period. Don't includemoving expense or bicycle commuting reimbursementson Form 940, line 4. For more information about fringebenefits, see Pub. 15-B.Certification program for professional employer organizations (PEOs). The Stephen Beck, Jr., Achieving aBetter Life Experience Act of 2014 required the IRS toestablish a voluntary certification program for PEOs.PEOs handle various payroll administration and taxreporting responsibilities for their business clients and aretypically paid a fee based on payroll costs. To becomeand remain certified under the certification program,certified professional employer organizations (CPEOs)must meet various requirements described in sections3511 and 7705 and related published guidance.Certification as a CPEO may affect the employment taxSep 23, 2020liabilities of both the CPEO and its customers. A CPEO isgenerally treated for employment tax purposes as theemployer of any individual who performs services for acustomer of the CPEO and is covered by a contractdescribed in section 7705(e)(2) between the CPEO andthe customer (CPEO contract), but only for wages andother compensation paid to the individual by the CPEO.To become a CPEO, the organization must apply throughthe IRS Online Registration System. For more informationor to apply to become a CPEO, visit the IRS website atIRS.gov/CPEO.For wages paid to a work site employee, a CPEO iseligible for the credit for state unemployment tax paid to astate unemployment fund, whether the CPEO or acustomer of the CPEO made the contribution. In addition,a CPEO is allowed the additional credit if the CPEO ispermitted, under state law, to collect and remitcontributions to the state unemployment fund with respectto a work site employee. For more information on thecredit, see Credit for State Unemployment Tax Paid to aState Unemployment Fund, later.CPEOs must generally file Form 940 and Schedule R(Form 940), Allocation Schedule for Aggregate Form 940Filers, electronically. For more information about aCPEO’s requirement to file electronically, see Rev. Proc.2017-14, 2017-3 I.R.B. 426, available at IRS.gov/irb/2017-03 IRB#RP-2017-14.Outsourcing payroll duties. Generally, as an employer,you're responsible to ensure that tax returns are filed anddeposits and payments are made, even if you contractwith a third party to perform these acts. You remainresponsible if the third party fails to perform any requiredaction. Before you choose to outsource any of your payrolland related tax duties (that is, withholding, reporting, andpaying over social security, Medicare, FUTA, and incometaxes) to a third-party payer, such as a payroll serviceprovider or reporting agent, go to IRS.gov/OutsourcingPayrollDuties for helpful information on thistopic. If a CPEO pays wages and other compensation toan individual performing services for you, and the servicesare covered by a contract described in section 7705(e)(2)between you and the CPEO (CPEO contract), then theCPEO is generally treated for employment tax purposesas the employer, but only for wages and othercompensation paid to the individual by the CPEO.However, with respect to certain employees covered by aCPEO contract, you may also be treated as an employerof the employees and, consequently, may also be liablefor federal employment taxes imposed on wages andother compensation paid by the CPEO to suchemployees. For more information on the different types ofthird-party payer arrangements, see section 16 in Pub. 15.Aggregate Form 940 filers. Approved section 3504agents and CPEOs must complete Schedule R (FormCat. No. 13660I

For EFTPS, go to EFTPS.gov, or call one of thenumbers provided under Federal tax deposits must bemade by electronic funds transfer (EFT), earlier.Electronic funds withdrawal (EFW). If you file Form940 electronically, you can e-file and use EFW to pay thebalance due in a single step using tax preparationsoftware or through a tax professional. However, don't useEFW to make federal tax deposits. For more informationon paying your taxes using EFW, go to IRS.gov/EFW.940) when filing an aggregate Form 940. AggregateForms 940 are filed by agents of home care servicerecipients approved by the IRS under section 3504. Torequest approval to act as an agent for an employer, theagent files Form 2678 with the IRS unless you’re a state orlocal government agency acting as an agent under thespecial procedures provided in Rev. Proc. 2013-39,2013-52 I.R.B. 830, available at IRS.gov/irb/2013-52 IRB#RP-2013-39.Aggregate Forms 940 are also filed by CPEOsapproved by the IRS under section 7705. CPEOs fileForm 8973, Certified Professional Employer Organization/Customer Reporting Agreement, to notify the IRS thatthey started or ended a service contract with a customer.CPEOs must generally file Form 940 and Schedule Relectronically. For more information about a CPEO'srequirement to file electronically, see Rev. Proc. 2017-14,2017-3 I.R.B. 426, available at IRS.gov/irb/2017-03 IRB#RP-2017-14.Credit or debit card payments. You may pay yourFUTA tax shown on line 14 using a credit or debit card.Your payment will be processed by a payment processorwho will charge a processing fee. Don't use a credit ordebit card to pay taxes that are required to be deposited(see When Must You Deposit Your FUTA Tax, later). Formore information on paying your taxes with a credit ordebit card, go to IRS.gov/PayByCard.Online payment agreement. You may be eligible toapply for an installment agreement online if you can't paythe full amount of tax you owe when you file your return.For more information, see What if you can't pay in full,later.If you change your business name, business address, or responsible party. Notify the IRS immediatelyif you change your business name, business address, orresponsible party. Write to the IRS office where you file your returns (usingthe Without a payment address under Where Do You File,later) to notify the IRS of any business name change. SeePub. 1635 to see if you need to apply for a new employeridentification number (EIN). Complete and mail Form 8822-B to notify the IRS of abusiness address or responsible party change. Don’t mailForm 8822-B with your Form 940. For a definition of“responsible party,” see the Instructions for Form SS-4.Disregarded entities and qualified subchapter S subsidiaries (QSubs). Business entities that aredisregarded as separate from their owner, includingQSubs, are required to withhold and pay employmenttaxes and file employment tax returns using the name andEIN of the disregarded entity. For more information, seeDisregarded entities, later.State unemployment information. When youregistered as an employer with your state, the stateassigned you a state reporting number. If you don't have astate unemployment account and state experience taxrate, or if you have questions about your state account,you must contact your state unemployment agency. For alist of state unemployment agencies, visit the U.S.Department of Labor's website at oui.doleta.gov/unemploy/agencies.asp.Federal tax deposits must be made by electronicfunds transfer (EFT). You must use EFT to make allfederal tax deposits. Generally, an EFT is made using theElectronic Federal Tax Payment System (EFTPS). If youdon't want to use EFTPS, you can arrange for your taxprofessional, financial institution, payroll service, or othertrusted third party to make electronic deposits on yourbehalf. Also, you may arrange for your financial institutionto initiate a same-day wire payment on your behalf.EFTPS is a free service provided by the Department of theTreasury. Services provided by your tax professional,financial institution, payroll service, or other third partymay have a fee.For more information on making federal tax deposits,see section 11 of Pub. 15. To get more information aboutEFTPS or to enroll in EFTPS, go to EFTPS.gov, or call800-555-4477, 800-733-4829 (TDD), or 800-244-4829(Spanish). Additional information about EFTPS is alsoavailable in Pub. 966.Photographs of missing children. The IRS is a proudpartner with the National Center for Missing & ExploitedChildren (NCMEC). Photographs of missing childrenselected by the Center may appear in instructions onpages that would otherwise be blank. You can help bringthese children home by looking at the photographs andcalling 1-800-THE-LOST (1-800-843-5678) if yourecognize a child.How Can You Get More Help?If you want more information about this form, see Pub. 15,visit our website at IRS.gov, or call the Business andSpecialty Tax Line toll free at 800-829-4933 or800-829-4059 (TDD/TTY for persons who are deaf, hardof hearing, or have a speech disability), Monday–Fridayfrom 7:00 a.m. to 7:00 p.m. local time (Alaska and Hawaiifollow Pacific time).Electronic filing and payment. Businesses can enjoythe benefits of filing and paying their federal taxeselectronically. Whether you rely on a tax professional orhandle your own taxes, the IRS offers you convenientprograms to make filing and paying easier. Spend lesstime worrying about taxes and more time running yourbusiness. Use e-file and EFTPS to your benefit. For e-file, go to IRS.gov/EmploymentEfile for additionalinformation. A fee may be charged to file electronically.For a list of related employment tax topics, go toIRS.gov/EmploymentTaxes. You can order forms,instructions, and publications at IRS.gov/OrderForms.-2-Instructions for Form 940 (2020)