Federal unemployment tax is due quarterly, with payments made to the IRS by the last day of the month following each quarter

As an employer, you owe Federal Unemployment Tax Act (FUTA) tax on wages you pay to employees. The IRS collects this tax in quarterly installments rather than with each paycheck. The payment deadline for each quarter falls on the last day of the month after that quarter ends: April 30 for Q1, July 31 for Q2, October 31 for Q3, and January 31 for Q4.

You report and pay FUTA tax using Form 940, which you file once per year. However, if your quarterly liability exceeds $500, you must make a deposit before the quarterly deadline — you cannot wait until you file Form 940. The IRS uses the Electronic Federal Tax Payment System (EFTPS) or an approved third-party payment processor to collect these deposits.

FUTA tax applies only to the first $7,000 of wages paid to each employee in a calendar year. The tax rate is 6.0 percent, though you may receive a credit of up to 5.4 percent if you pay state unemployment tax on time, bringing your effective federal rate to as low as 0.6 percent.

Key Takeaways

  • Quarterly FUTA deposits are due by the last day of the month following each quarter: April 30, July 31, October 31, and January 31.
  • You only have to make a quarterly deposit if your total FUTA liability for that quarter exceeds $500; otherwise you can pay when you file Form 940 annually.
  • FUTA tax applies only to the first $7,000 of each employee's annual wages, not to all wages paid.
  • You must use EFTPS or an IRS-approved payment processor to deposit FUTA tax; mailing a check does not satisfy the deposit requirement.
  • The standard FUTA rate is 6.0 percent, but most employers receive a credit that reduces it to 0.6 percent if state unemployment tax is paid on time.

How the quarterly deposit threshold works

The $500 threshold determines whether you deposit or wait. Add up all FUTA tax owed for the quarter — that is, 6.0 percent of taxable wages (capped at $7,000 per employee) for all employees during those three months. If the total is $500 or less, you do not have to deposit; you can pay the amount when you file Form 940 in January of the following year.

If the total exceeds $500, you must deposit by the quarterly deadline. Missing the deadline triggers a penalty, even if you pay the full amount later. The penalty is typically 2 to 10 percent of the unpaid tax, depending on how late the payment is.

Track your FUTA liability throughout the quarter so you know whether you will cross the $500 threshold. Many payroll systems calculate this automatically, but if you process payroll manually, add up the taxable wages each pay period and multiply by 0.06 to see where you stand.

The annual Form 940 filing deadline

Form 940 is your annual FUTA tax return. It is due by January 31 of the year following the tax year you are reporting. For example, your 2024 Form 940 is due January 31, 2025. If January 31 falls on a weekend or holiday, the deadline moves to the next business day.

On Form 940, you report total wages paid, calculate your FUTA tax, claim any state unemployment tax credits, and reconcile any quarterly deposits you already made. If you deposited more than you owe, the IRS refunds the difference. If you owe more, you pay the balance with the form.

You can request an automatic extension to file Form 940 by submitting Form 7004 by January 31. The extension gives you until October 31 to file, but it does not extend the time to pay any tax owed — that is still due by January 31.

State unemployment tax and the FUTA credit

Most employers also pay state unemployment tax (SUTA), which varies by state and by industry. The federal government allows you to credit up to 5.4 percent of FUTA tax against your state unemployment tax payment. This credit is the reason the effective FUTA rate is often 0.6 percent instead of 6.0 percent.

To receive the full 5.4 percent credit, you must pay your state unemployment tax on time. If your state is on the IRS "credit reduction list" — meaning it borrowed from the federal government and has not repaid the loan — your credit may be reduced. Check the IRS website or your state labor department to see whether your state is affected.

If you do not pay state unemployment tax, you still owe the full 6.0 percent federal rate. The credit is not automatic; it is only available if you actually pay state tax.

Payment methods and record-keeping

The IRS requires you to use EFTPS (Electronic Federal Tax Payment System) or an IRS-approved third-party payment processor to deposit FUTA tax. You cannot mail a check or pay by phone. EFTPS is free and allows you to schedule payments in advance so you do not miss a deadline.

To enroll in EFTPS, visit the EFTPS website or call 1-800-555-4477. Enrollment takes about five to ten business days. Once enrolled, you can make deposits online or by phone. Many payroll service providers also offer integrated payment processing that connects directly to EFTPS.

Keep records of all FUTA deposits, including confirmation numbers and dates paid. The IRS may request proof of payment if there is a discrepancy between what you reported on Form 940 and what the agency received. Bank statements alone are not sufficient; you need the EFTPS confirmation or a receipt from your payment processor.

What happens if you miss a deadline

If you miss a quarterly deposit deadline, the IRS assesses a failure-to-deposit penalty. The penalty rate depends on how many days late the payment is: 2 percent if paid within five days, 5 percent if paid six to fifteen days late, 10 percent if paid more than fifteen days late, and 15 percent if the tax is not paid by the date of the IRS notice and demand for payment.

In addition to the penalty, you owe interest on the unpaid tax from the due date until you pay. Interest is compounded daily and changes quarterly based on the federal short-term rate.

If you discover you missed a deposit, pay as soon as possible and file Form 941-X (Adjusted Employer's Quarterly Federal Tax Return for Income, Social Security, and Medicare Taxes) or Form 940-X (Adjusted Employer's Annual Federal Unemployment Tax Return) to correct the error and request penalty relief if you have reasonable cause. The IRS may waive the penalty if you can show that the failure was due to circumstances beyond your control.

Frequently Asked Questions

Do I have to deposit FUTA tax if I only have one employee?

Only if your quarterly FUTA liability exceeds $500. If you have one employee earning $10,000 per quarter, your FUTA tax is $600 (6.0 percent of $7,000, the wage cap), so you must deposit. If the employee earns $8,000 per quarter, your tax is $480, so you can wait and pay with Form 940.

What if my business is seasonal and I only pay wages during certain months?

You still follow the quarterly deposit rule based on when you actually pay wages. If you pay all wages in Q4, your Q1, Q2, and Q3 liabilities are zero and no deposits are due. Your Q4 liability is calculated on wages paid in October, November, and December, and you deposit by January 31 if it exceeds $500.

Can I pay FUTA tax with my state unemployment tax payment?

No. FUTA and state unemployment tax are separate systems with separate payment deadlines and payment methods. You must deposit FUTA through EFTPS or an approved processor, and you must pay state unemployment tax according to your state's rules, which vary.

What if I filed Form 940 but forgot to include a deposit I made?

File Form 940-X to amend your return and report the deposit. Attach documentation of the payment, such as your EFTPS confirmation. The IRS will reconcile the deposit and adjust your refund or balance due accordingly.

Do independent contractors count toward FUTA tax?

No. FUTA tax applies only to employees, not to independent contractors or self-employed individuals. You do not withhold or pay FUTA on 1099 payments. Independent contractors are responsible for their own self-employment tax.