Employer's Annual Federal Unemployment Tax Return in Memphis, Tennessee (2026)
Your business risks IRS penalties and forfeits state credit if you fail to file the Employer's Annual Federal Unemployment Tax Return (FUTA Form 940). This federally mandated tax form, administered by the U.S. Internal Revenue Service for businesses in Memphis, Tennessee, is required regardless of state unemployment insurance payments. Key facts:
- 97 fields — ApronPrep auto-fills 81
- $0–$0 government filing fees (FUTA deposit liability applies separately)
- Varies processing time
Analyzed from Employer's Annual Federal Unemployment Tax Return
84% from one compliance interview
Manual entry or document upload required
Why You Need a Employer's Annual Federal Unemployment Tax Return
The requirement to file Form 940, the Employer's Annual Federal Unemployment Tax Return, is mandated by the U.S. Internal Revenue Code (Title 26, Subtitle C, Chapter 23). This is a federal requirement, so whether your restaurant is in Memphis, Nashville, or Chattanooga, the law applies uniformly across Tennessee. The form reports your annual Federal Unemployment Tax Act (FUTA) tax liability, which funds unemployment benefits for workers who have lost their jobs. This is a separate tax from your state unemployment insurance contributions to the Tennessee Department of Labor & Workforce Development.
Missing the filing deadline or underpaying your FUTA tax triggers significant penalties and operational risks. Based on IRS enforcement data, the consequences include:
- Failure-to-file penalty: 5% of the unpaid tax per month, up to a maximum of 25%.
- Failure-to-pay penalty: 0.5% of the unpaid tax per month, in addition to the filing penalty.
- Interest charges: The IRS charges interest on unpaid tax and penalties from the due date until paid.
- Operational and legal risks: An unresolved tax debt can lead to federal tax liens, which damage your business credit and can complicate lease renewals or financing. In cases of willful neglect or fraud, criminal prosecution is possible.
Legal code: Internal Revenue Code (Title 26)
Recent update: For the 2026 tax year, the IRS has confirmed the FUTA tax rate remains 6.0% on the first $7,000 of each employee's wages, though the effective rate is typically 0.6% after claiming the maximum state credit.
Who Needs a Employer's Annual Federal Unemployment Tax Return?
| Type | Required | Notes |
|---|---|---|
| Restaurant (Full-Service) | Required | If you paid $1,500 or more in wages in any calendar quarter of 2026, or had at least one employee for part of a day in each of 20+ calendar weeks, you must file Form 940. |
| Bar / Nightclub | Required | Employers meeting the FUTA liability threshold of paying at least $1,500 in wages in a quarter must file the annual return. |
| Food Truck | Required | If the business meets the FUTA wage or employee count tests, it must file Form 940 regardless of being mobile. |
| Coffee Shop / Café | Required | Applies if you paid wages subject to unemployment tax totaling $1,500+ in a quarter or met the 20-week employment test. |
See which restaurant types need this requirement — and which don't.
See Full Requirements →Field-by-Field Guide (97 Fields)
81 of 97 auto-filledQ2 Tax Liability - Dollars (Line 16b)
textEnter the whole dollar portion of your total federal unemployment (FUTA) tax liability for the second quarter (April, May, June), calculated as 0.6% of the first $7,000 paid to each employee during that quarter.
COMMON MISTAKE: Mistake: Entering the total wages paid instead of the calculated tax liability (6.0% vs. 0.6%). Consequence: Incorrect payment calculation triggers an IRS notice and potential penalty.
Q2 Tax Liability - Cents (Line 16b)
textEnter the cents portion of your FUTA tax liability for the second quarter; if the amount is a whole dollar, enter '00'.
COMMON MISTAKE: Mistake: Leaving the cents field blank when the liability includes cents. Consequence: Incomplete form may be rejected or cause a mismatch in the IRS payment system.
Q3 Tax Liability - Dollars (Line 16c)
textEnter the whole dollar portion of your FUTA tax liability for the third quarter (July, August, September), based on wages subject to FUTA tax paid during that period.
COMMON MISTAKE: Mistake: Copying the Q2 amount into Q3 without recalculating based on new quarterly wages. Consequence: Results in underpayment or overpayment, leading to IRS correspondence and reconciliation delays.
Q3 Tax Liability - Cents (Line 16c)
textEnter the cents portion of your FUTA tax liability for the third quarter.
Q4 Tax Liability - Dollars (Line 16d)
textEnter the whole dollar portion of your FUTA tax liability for the fourth quarter (October, November, December).
COMMON MISTAKE: Mistake: Failing to account for the annual wage limit ($7,000 per employee) and calculating tax on wages already taxed in prior quarters. Consequence: Overstates liability, leading to an overpayment you must claim as a credit on the next return.
Q4 Tax Liability - Cents (Line 16d)
textEnter the cents portion of your FUTA tax liability for the fourth quarter.
Other Third Party Filer
checkboxCheck this box ONLY if you are a third-party payer (other than a CPEO or Section 3504 Agent) filing a single aggregate Form 940 for multiple employers under an IRS authorization.
COMMON MISTAKE: Mistake: An individual employer checking this box because they use a payroll service. Consequence: Misrepresentation of filing status can invalidate the return and shift liability.
Certified Professional Employer Organization
checkboxCheck this box ONLY if you are a Certified Professional Employer Organization (CPEO) filing under the CPEO program.
Section 3504 Agent
checkboxCheck this box ONLY if you are an agent authorized under IRS Section 3504 to perform acts required of an employer.
Account Type: Checking (Line 15d)
checkboxCheck this box if you are requesting a refund via direct deposit and the bank account provided is a checking account.
COMMON MISTAKE: Mistake: Checking both 'Checking' and 'Savings' or leaving both blank when requesting a direct deposit refund. Consequence: IRS will reject the direct deposit request and issue a paper check, delaying your refund by 2–3 weeks.
ApronPrep auto-fills 81 of 97 fields from a single compliance interview — no re-typing, no guessing what the government expects.
Top 5 Employer's Annual Federal Unemployment Tax Return Mistakes
1. Misunderstanding the $7,000 Wage Base for Each Employee
Applying the 0.6% FUTA tax to an employee's total annual wages instead of just the first $7,000 paid to them for the year. This results in an overpayment to the IRS, requiring a lengthy claim for a refund. To avoid it, use the IRS's specific quarterly wage reporting to track when each employee's annual earnings hit the $7,000 cap.
2. Filing Form 940 Without Reconciling with State Unemployment (SUTA) Taxes
Failing to report state unemployment tax payments accurately in Part 2 of Form 940, which calculates the federal credit. Entering incorrect amounts here can trigger an IRS notice, an audit, and an unexpected tax bill. You must ensure the SUTA payments listed on your state quarterly reports match what you enter on Form 940 for the same period.
3. Missing the January 31 Deadline Because of Incorrect Payment Application
Assuming your state unemployment tax payments also cover your federal FUTA liability, or waiting until year-end to pay. The FUTA tax is a separate federal obligation with its own deposit schedule, often due quarterly. Missing deposits can result in late payment penalties from the IRS, calculated as a percentage of the underpayment.
Skip the Paperwork on Your Employer's Annual Federal Unemployment Tax Return
ApronPrep auto-fills 81 of 97 fields from one compliance interview.
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Employer's Annual Federal Unemployment Tax Return by City in Tennessee
| City | Fee Range | Timeline |
|---|---|---|
| Knoxville | ||
| Memphis | ||
| Nashville |
Timeline: From Calculation to Filing (Varies by Quarter)
Calculate Quarterly FUTA Tax Liability
Review payroll records for each quarter to determine FUTA wages paid (first $7,000 paid to each employee per year) and calculate your liability. You need W-2 forms, payroll reports, and the prior year's Form 940 to confirm wage bases. The most common error is miscalculating the wage base for employees hired mid-year, which leads to underpayment and penalties.
Make Quarterly FUTA Tax Deposits via EFTPS
If your quarterly FUTA liability exceeds $500, you must deposit the tax using the IRS's Electronic Federal Tax Payment System (EFTPS) by the last day of the month following the quarter's end (e.g., April 30 for Q1). Have your Employer Identification Number (EIN) and banking details ready. Missed or late deposits incur a failure-to-deposit penalty of 2% to 15% of the underpayment.
Prepare and Complete Form 940 for the Tax Year
After the year ends, complete IRS Form 940 (Employer's Annual Federal Unemployment Tax Return) by January 31. Use your quarterly deposit records and annual payroll summary. Part 2 (State Unemployment Tax Adjustments) often causes rejections; you'll need your Tennessee Department of Labor & Workforce Development (TDOL) account number and state unemployment tax payment history to accurately report credits.
Other Requirements You'll Need
This is one of 13 requirements for opening a restaurant in Tennessee.
ADA Compliance Self-Certification
federal
Alarm System Permit/Registration
local
Alcohol Server Training Certification
state
Annual Report Filing
state
See all co-required forms and how they connect to your compliance dossier.
See All RequirementsProcessing timelines for the Employer's Annual Federal Unemployment Tax Return (Form 940) vary based on your filing method. Electronic filing directly to the IRS typically results in immediate confirmation of receipt, while paper filings take longer to process. The IRS does not publish a standard approval timeline for this specific federal tax form. You must also file a separate, state-level unemployment tax report, which is the Annual Report Filing with the Tennessee Department of Labor & Workforce Development.
There is no direct government filing fee to submit Form 940 to the IRS. However, you owe the tax calculated on the form, which is 6.0% of the first $7,000 paid to each employee annually. Most employers qualify for a 5.4% credit, effectively paying 0.6%. This is separate from any state unemployment tax liability you must pay through your Annual Report Filing with Tennessee.
No, you cannot 'transfer' a federal unemployment tax return. Form 940 is an annual tax filing, not a location-based permit. If you move your business, you must update your address with the IRS using Form 8822-B and also update your address with the Tennessee Department of Labor for your state unemployment tax account. Contact both authorities to confirm the address change process for your tax accounts.
Form 940 is a required annual tax filing. It is due by January 31 for the prior calendar year, covering wages paid between January 1 and December 31. If you deposited all FUTA tax when due, you have until February 10 to file. This is a recurring federal obligation and is distinct from other annual requirements like a local City Business License/Registration.
There is no physical 'inspection' for Form 940. Compliance is verified through IRS audits of your payroll records. An audit involves reviewing your payroll registers, federal tax deposits, and employee W-2 forms to verify the accuracy of your reported wages and tax calculations. Ensure your records support your filings by maintaining them for at least four years, as required by the IRS. Not legal advice — consult a tax professional.
About This Data
This guide is generated from ApronPrep's compliance dossier system, which uses 53 parallel AI authority experts to discover requirements, then downloads actual forms and generates field-level intelligence for each one.
For Tennessee specifically, we have analyzed compliance dossiers for 3 cities (Knoxville, Memphis, Nashville), generating Rich FILs (Form Intelligence Layers) with 97 form fields analyzed for this requirement. Fee data is sourced from actual county department fee schedules, not estimates.
Our data is verified against official government sources and updated when regulatory changes are detected. If you find an error, please report it — accuracy is our core commitment.
Sources
- Internal Revenue Code (Title 26)
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