FUTA Tax: Federal Unemployment

Quarterly deposits, the $500 threshold, and reconciling on the annual Form 940

What Is FUTA?

How Much Is It?

FUTA is calculated on the first $7,000 of each employee’s wages per year. Once an employee earns more than $7,000, they stop contributing to FUTA liability for the rest of that year.

When Do You Deposit?

Unlike 941 semi-weekly deposits, FUTA follows a quarterly schedule, but only when you hit the threshold.

Quarterly deposit deadlines (last day of the month following each quarter):

Running the FUTA Report in Avionté

Use the Taxes Summary Lite report (the same one used for 941 liability) but filtered to FUTA.

Reports › Tax Reports › Taxes Summary Lite

1. Set the date range to cover the full quarter. Set Check Date From to the first day of the quarter and Check Date To to the last day of the quarter. For example, for Q1 enter 1/1/2026 through 3/31/2026.
2. Select your company (FEIN). Pick the correct Company from the dropdown. If multiple FEINs exist, run separately for each: they each file their own Form 940.
3. Filter the Tax Group to FUTA. In the Tax Group or Tax Type filter, select FUTA. This removes all 941 taxes, state taxes, and everything else from the results.
4. Run the report and note the total. The report shows the FUTA tax amount for the quarter. Add this to any balance carried forward from prior quarters to get the running cumulative total. If that total exceeds $500, a deposit is due.
5. Verify the $7,000 wage base cap. FUTA only applies to the first $7,000 per employee. Avionté tracks this automatically. Once an employee hits the wage base, their wages stop contributing to FUTA. If the number looks low mid-year, this is likely why, and it is correct.

The Annual Form 940: Year-End Reconciliation

Even if quarterly deposits were made throughout the year, Form 940 must be filed at year-end. Think of it like a tax return: the deposits were the payments throughout the year, and the 940 is where you reconcile everything.

1. Run the Taxes Summary Lite for the full year. Set the date range to January 1 – December 31 for the tax year. Filter to FUTA. The total is the annual FUTA liability and should match what you report on Form 940.
2. Confirm all quarterly deposits match. Add up the four quarterly deposits made during the year. The total should equal the annual FUTA liability. Any difference is either a balance due (pay by January 31) or an overpayment you can apply to the next year or request as a refund.
3. File Form 940 by January 31. Form 940 is due January 31 of the following year. If all deposits were made on time and in full, there is a 10-day extension to February 10. Most companies file through payroll tax software or a tax professional.

See Also

FUTA is governed by the Federal Unemployment Tax Act and IRS Publication 15 (Circular E). Credit reduction state status is announced by the IRS each November. Form 940 and its instructions are available at irs.gov. Consult your tax team for company-specific guidance.