Why Form 940 isn't issued every quarter

Form 940 is the federal unemployment tax (FUTA) annual return filed through 7shifts Payroll. If you noticed Form 940 wasn't issued in Q3 or Q4, that's expected - the IRS only requires a FUTA deposit when specific conditions are met, and for most businesses, those conditions only apply early in the year.

When Form 940 deposit notices start

A Form 940 deposit notice is triggered when two conditions are both met:

• Active FUTA liability: FUTA tax is 0.6% (after the standard state unemployment tax credit) applied to the first $7,000 of each employee's wages per year. Liability accumulates as long as employees are earning and haven't yet reached the $7,000 threshold.
• Liability crosses $500: The IRS only requires a deposit once accumulated FUTA liability exceeds $500 in a quarter. Below that, the balance carries forward silently to the next quarter.

For most businesses, this means the deposit notice first appears early in the year - typically Q1 - once enough payroll has run to push liability past $500.

When Form 940 deposit notices stop

Deposit notices stop being generated once employees exhaust the $7,000 wage base. FUTA only applies to the first $7,000 each employee earns per year. Once an employee crosses that threshold, they contribute $0 to FUTA liability for the rest of the year.

For businesses with full-time staff, this typically happens by Q2 or Q3. With no new liability accumulating, the balance stays under $500 - so no deposit notice is generated for Q3 or Q4.

Annual reset

On January 1, the $7,000 wage base resets for every employee. FUTA liability starts accumulating again from $0, and the cycle repeats. If Q1 payroll runs slowly enough that accumulated liability doesn't cross $500 right away, the deposit notice won't appear until it does - so a gap at the very start of the year is also expected.

The annual Form 940 is always filed at year-end and is due January 31, regardless of whether deposit notices were generated during the year.

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