What is IRS Form 940?

Internal Revenue Service Form 940 is the employer's annual federal unemployment tax return that employers use to report federal unemployment taxes, as of 2015, states the IRS. Federal and state governments combine their taxes into a fund that compensates workers who become unemployed.

Employers are not allowed to deduct or collect unemployment tax from workers' wages, according to the IRS. Employees do not pay the tax; generally, employers pay state and federal unemployment taxes. Form 940, instructions for completing the form and schedules related to the form, such as Schedule A for multistate employers and credit reduction information, are available at the IRS website, irs.gov.