The Internal Revenue Service (IRS) has released the 2010 Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, and accompanying instructions. Employers use Form 940 to report their annual Federal Unemployment Tax Act (FUTA) tax.

FUTA Tax Must Be Deposited Electronically Using EFTPS in 2011

As previously announced, the IRS will discontinue accepting paper coupons for depository taxes after December 31, 2010. Employers should make their deposits electronically using Electronic Federal Tax Payment System (EFTPS).

Three Credit Reduction States for 2010

There are three credit reduction states for 2010: Michigan, Indiana, and South Carolina. The effective FUTA rate for most Michigan employers is 1.4% and for most Indiana and South Carolina employers it’s 1.1%. Most other employers have an effective rate of 0.8%.

2011 FUTA Rate Scheduled to Decrease

Under current law, the FUTA tax rate is scheduled to decrease to 6.0% (before SUTA credits) on July 1, 2011. The rate for the first six months of 2011 is 6.2%.

Vision Payroll to File Form 940 Electronically

Vision Payroll will file Form 940 for its clients electronically with the IRS and will not submit the paper version. Employers will be able to download a copy of Form 940 for their records.