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Most preparers go an entire career without touching Form 940-B, and that is exactly why it rattles people when one lands. It is not something the employer files. The IRS issues it to a state unemployment agency when it doubts the 5.4% credit a client claimed against the 6.0% FUTA rate, asking the state to confirm the contributions behind that credit.
The verification stalls in one predictable place: when the employer's records do not line up with the state's files. If the EIN, the state reporting number, the taxable payroll, or the payment timing is off, the state cannot certify cleanly. Contributions paid after the due date are also limited to 90% of the otherwise-allowable credit, so timing is worth confirming before the state ever pulls the file.
Key Takeaways
- Form 940-B is a “Request for Verification of Credit Information Shown on Form 940” – it is sent to the state workforce agency to confirm an employer’s state unemployment tax (SUI) payment history for FUTA credit purposes.
- The IRS issues this form when it questions the 5.4% FUTA credit an employer claimed on Form 940, asking the state unemployment agency to verify the employer’s SUI payment history behind that credit.
- Form 940-B is not filed by the employer – the IRS issues it to the state workforce agency, which completes the certification and returns it to the IRS. The state’s certified response goes back to the IRS directly, supporting the credit claimed on the employer’s Form 940.
- There is no annual deadline; the form is submitted on demand whenever verification is needed, typically in response to an IRS notice or as audit preparation.
- The most common pitfall is disorganized state-contribution records – when the EIN, state reporting number, taxable payroll, or payment timing do not match the state’s own files, the state’s certification stalls and the IRS dispute timeline drags out.
- Quick rule you can copy into your SOP: whenever a client receives an IRS notice questioning the FUTA credit, expect the IRS to issue Form 940-B to the relevant state agency for verification, and keep the state-contribution records organized so the state can certify them quickly.
What Form 940-B Is and When to Use It
Form 940-B – “Request for Verification of Credit Information Shown on Form 940” – is a verification tool, not a tax return. The IRS sends it to the employer’s state workforce agency (the state unemployment insurance authority) to obtain official written confirmation of the SUI taxes the employer paid during a specific calendar year.
Under the Federal Unemployment Tax Act, employers can reduce their 6.0% FUTA rate by up to 5.4% if they paid state unemployment taxes in full and on time. Late state contributions are not lost entirely, but they are limited to 90% of the otherwise-allowable credit under IRC §3302(c), not the full 5.4%. The IRS may challenge this credit if its records do not match the employer’s claim. Form 940-B provides the mechanism to get state-level documentation that proves the employer did, in fact, pay SUI taxes and is entitled to the credit claimed on Form 940.
The form is relatively rare in day-to-day practice, but in audit situations, merger cleanups, or cases where an employer changed state registrations mid-year, it becomes a critical piece of documentation.
Triggering Events for Form 940-B
The most common reasons an employer or practitioner uses Form 940-B include: (1) receiving an IRS notice asserting that the FUTA credit is incorrect or unsubstantiated; (2) preparing for an IRS audit where Form 940 FUTA credits will be scrutinized; (3) resolving discrepancies between the employer’s payroll records and the state agency’s records; and (4) documenting FUTA credit claims for a newly acquired business where prior year records are incomplete.
Who Actually Uses Form 940-B
Form 940-B is issued by the IRS, not prepared or filed by employers, but in practice, it is most common among larger multi-state employers, clients under IRS audit, and recently acquired entities where payroll compliance history is being reconstructed. For well-organized small businesses with clean SUI payment records, the need rarely arises.
How Form 940-B Fits into the IRS Dispute Process
Form 940-B is issued by the IRS and sent to the state agency. The employer does not file or route it. The state completes the form, certifying the employer’s SUI payment history, and returns it to the IRS by fax or by mail to the Director, Internal Revenue Service Center. The state agency returns the completed form to the IRS directly, not to the employer. Keep a copy of the submitted form and the state’s completed response in the client file alongside the Form 940 for that year.
How to Complete Form 940-B
Form 940-B is a one-page form. The IRS populates the credit information from the employer’s filed Form 940, and the state agency completes the certification section. Here is what goes where.
| Section | Completed By | Information Required |
|---|---|---|
| Employer Information | IRS (from filed Form 940) | Legal name, trade name (if different), EIN, address |
| State Information | IRS (from filed Form 940) | Name of state being queried, state employer account number |
| Tax Year | IRS (from filed Form 940) | Calendar year for which FUTA credit verification is requested |
| State Wages Reported | IRS (from filed Form 940) | Total wages reported to the state for SUI purposes during the year |
| State Taxes Paid | IRS (from filed Form 940) | Total SUI taxes paid to the state during the year |
| Certification Section | State Agency | State agency confirms, modifies, or disputes the employer-provided figures and signs |
Gathering Information Before Completing the Form
Because the IRS populates Form 940-B from the filed Form 940, your job is to keep the client’s SUI tax return filings for the relevant state and year organized so the state can verify them. You need the total wages reported for SUI purposes and the total SUI taxes paid, broken down by quarter if possible. Keep in mind that state-taxable payroll is defined by the applicable State Act and can differ from the federal $7,000 FUTA wage base, so the state figure will not always match the wages reported on Form 940. If the client paid late or made adjustments during the year, include all payments, not just on-time amounts – the state agency will have the complete record and will correct any discrepancies.
Submitting to the State Agency
The IRS sends Form 940-B to the state’s unemployment insurance division – the employer does not mail it. The state’s FUTA Liaison completes the certification and returns the form to the IRS by fax or by mail to the Director, Internal Revenue Service Center. Response times vary by state – some states respond within two weeks, others take four to six weeks.
What to Do When the State Returns the Form
Review the state’s completed certification section carefully. If the state confirms the employer’s figures, the form is ready for IRS submission. If the state modifies the figures – showing lower wages or taxes than the employer reported – you have a payroll reconciliation issue that needs to be resolved before responding to the IRS. The state returns Form 940-B to the IRS directly, so the employer never submits it; resolve any state-level discrepancy with the state agency.
Deadlines and Filing Requirements
Form 940-B has no fixed annual filing deadline. It is an on-demand form submitted whenever verification of FUTA credit information is needed. However, if you are using it to respond to an IRS notice, the IRS’s own response deadline applies to your overall reply. Typical IRS notice response windows are 30 to 60 days.
| Situation | Timing Consideration | Best Practice |
|---|---|---|
| IRS notice received questioning FUTA credit | The IRS issues Form 940-B to the state for verification | Keep state-contribution records organized so the state can certify quickly |
| Audit preparation | No deadline; the IRS issues Form 940-B as part of the audit | Have state-contribution records for all audit years organized before the examination |
| Acquisition due diligence | No deadline | Obtain state verification for prior 3–4 years as part of payroll compliance review |
State Response Times
State agencies are not bound to any specific response timeline for Form 940-B. Based on my experience, California and New York tend to be slower (four to six weeks), while smaller states often respond in two to three weeks. Because the IRS issues the form to the state, the employer does not mail Form 940-B. If the state does not respond within four weeks, call the state’s employer tax unit directly.
When Employers Actually Need Form 940-B
Most employers never use Form 940-B. The form exists to resolve specific situations where the FUTA credit is disputed or unverifiable from IRS records alone. Understanding those situations helps you anticipate when to pull it proactively.
IRS CP2000 or Similar FUTA Credit Notice
If the IRS issues a CP2000 or a notice of proposed adjustment related to the FUTA credit on Form 940, the IRS is asserting that its records do not confirm the state unemployment taxes you claimed. This is the most common trigger for Form 940-B. The state’s written verification directly addresses the IRS’s concern and is typically sufficient to resolve the dispute without further assessment.
Employer Records Do Not Match State Records
Sometimes payroll software records show SUI payments that the state’s system has not recorded – perhaps due to a payment that was applied to the wrong account, a late-filing penalty that was assessed, or a state EIN that changed mid-year. Form 940-B forces the state to articulate exactly what it has on file, which surfaces any discrepancy that needs to be resolved. Small errors create big cleanup when these go unaddressed.
Business Acquisitions and Successor Employer Situations
When a business is acquired, the successor employer inherits the payroll compliance history of the predecessor. If the IRS later questions FUTA credits from years before the acquisition, the current employer may need to obtain verification from the state for periods it did not manage. Form 940-B requests can cover prior periods even if the current EIN differs from the one that filed the original returns.
Multi-State Employers with Complex SUI Histories
Employers operating in multiple states may have inconsistencies across state SUI accounts – different payment schedules, different experience rating adjustments, or gaps from remote work transitions. If the IRS questions the aggregate FUTA credit on a multi-state Form 940, it may issue a separate Form 940-B to each relevant state, since each form covers a single state. Coordinating multiple state responses simultaneously requires organized tracking.
Understanding the State Agency Verification Process
When the IRS issues Form 940-B to the state, the state agency’s unemployment insurance division pulls the employer’s account from its own records system and verifies the wages and taxes reported for the requested year. Here is what happens on the state side and how to work with it.
What the State Verifies
The state confirms: (1) total taxable wages reported for SUI purposes during the calendar year; (2) total SUI taxes paid, including any late payments or amended returns; (3) whether the employer’s account was in good standing during the year; and (4) any credits or adjustments applied to the account. The state will note any discrepancies from what the employer reported on Form 940-B.
Common Reasons the State Modifies the Employer’s Figures
The state may show lower wages or taxes than the employer reported if: quarterly SUI returns were filed under a different EIN, payments were posted to a different account due to registration errors, or the employer failed to file one or more quarterly SUI returns for the year. Any of these situations requires cleanup at the state level before the IRS dispute can be fully resolved.
Using the Verified Form 940-B as IRS Evidence
Once the state completes and returns Form 940-B with an authorized signature, it constitutes official state agency documentation of SUI tax compliance. The IRS generally accepts this as conclusive evidence of the FUTA credit entitlement. Because the state returns the completed Form 940-B directly to the IRS, the certification reaches the IRS without the employer attaching it; keep any relevant state payment confirmations in the client file for reference.
Common Mistakes That Slow Things Down
From my side of the desk, the problems with Form 940-B almost never come from the form itself. They come from how the underlying state-contribution figures were tracked during the year. Here are the patterns I see most often.
Practical Checklists You Can Reuse
These checklists are copy-paste ready for your firm SOPs. Lift them into your workpaper templates so the figures behind the FUTA credit are organized before any verification question arrives.
FUTA credit verification packet
- Pull the calendar year’s Form 940 and the matching state SUI returns for that year.
- Record the employer EIN, state reporting number, and the calendar year being verified.
- Capture taxable payroll as defined by the State Act for column (3), separate from the $7,000 federal FUTA wage base.
- Log the experience rate and experience rate period (from and to) for columns (4) and (5).
- Total the contributions actually paid to the state for column (6), tied to cleared payments.
- Confirm the form in hand is Form 940-B (Rev. May 2010), Catalog No. 20910X.
State contribution timing reconciliation
- Confirm whether all state contributions were paid before February 1 for the full 5.4% credit.
- Flag any contributions paid after the Form 940 due date, capped at 90% of the otherwise-allowable credit under IRC §3302(c).
- Split payments into before February 1, February 1 through February 10, and after February 10.
- Note any credit-reduction state that lowers the maximum 5.4% credit.
- Verify the experience rate supports the additional credit under IRC §3302(b).
- Document the 6.0% statutory FUTA rate and the 0.6% effective rate after the full credit.
FUTA credit audit-response file
- Match the state-certified figures in columns (2) through (6) to the employer’s Form 940.
- Note any differences the state officer flagged in the certification section.
- Keep the state’s FUTA Liaison contact and the certified copy in the client file.
- Confirm whether the state returned the form by fax or by mail to the Director, Internal Revenue Service Center.
- Attach the verified figures to the Form 940 workpapers for the audit year.
Keep 940-B Season From Stalling
Form 940-B work clusters in the weeks right after the January 31, 2026 Form 940 deadline, when the IRS begins matching the 5.4% state-contribution credit against state agency records. FUTA applies to only the first $7,000 of each employee’s wages at a statutory 6.0% rate, and the full credit pulls the effective rate down to 0.6% (per IRS Publication 15 and the Form 940 instructions), so one mismatched state account can put both real dollars and a notice-response clock in motion.
The bottleneck is rarely the certification. It is reconstructing, state by state, which contributions were paid before February 1, which landed in the February 1 through February 10 window, and which arrived late enough to be capped at 90% of the otherwise-allowable credit under IRC §3302(c). A repeatable workflow turns that scramble into a routine pull.
- Keep column (6) “Contributions Actually Paid to State” reconciled against each state’s SUI returns year-round, so the paid figure is always audit-ready.
- Capture the experience rate and experience rate period for columns (4) and (5) the moment each state rate notice arrives, not when the IRS asks.
- Tag every state payment with its timing bucket (before February 1, February 1 through February 10, or after February 10) at the point of payment.
- Flag credit-reduction states early, since they lower the maximum 5.4% credit and change the figures the state will certify.
That is the kind of structured, documented execution we build into every engagement. Our tax execution teams keep state-contribution records reconciled and timing-bucketed throughout the year, so when a FUTA credit question lands, the verification support is already organized and the response goes out on schedule.
FAQs
What is Form 940-B used for?
Form 940-B is a “Request for Verification of Credit Information Shown on Form 940.” The IRS issues it and sends it to the employer’s state unemployment insurance agency to confirm that the state unemployment taxes (SUI) the employer paid in a given year are on record. This verification is used to substantiate the 5.4% FUTA credit claimed on Form 940, particularly when the IRS questions that credit.
Does Form 940-B get filed with the IRS?
No. The employer does not file Form 940-B – the IRS issues it and sends it directly to the state’s workforce agency. The state’s FUTA Liaison completes the certification section and returns the form to the IRS, by fax or by mail to the Director, Internal Revenue Service Center. Keep the completed form in the client file alongside the relevant Form 940.
When should I use Form 940-B?
The IRS issues Form 940-B when it questions the FUTA credit claimed on a Form 940 and needs the state unemployment agency to verify the employer’s state-contribution credit. It is also useful when employer records and state agency records do not match and you need the state’s official account history to identify the discrepancy.
How long does it take for the state to respond to Form 940-B?
Response times vary by state. Smaller states often respond within two to three weeks. Larger states like California and New York may take four to six weeks. Because the IRS issues the form to the state, the employer does not mail Form 940-B; the state returns the completed form to the IRS by fax or by mail to the Director, Internal Revenue Service Center. If the state has not responded within four weeks, follow up directly with the state employer tax unit. If you have an IRS response deadline approaching, request an extension from the IRS while awaiting the state’s response.
What if the state’s figures differ from the employer’s figures on Form 940-B?
If the state verifies different wages or taxes than the employer reported, you have a payroll reconciliation issue to resolve. Common causes include payments posted to a wrong account, unfiled quarterly SUI returns, or state EIN changes. Resolve the discrepancy at the state level first, then use the corrected figures when responding to the IRS. Because the state returns Form 940-B directly to the IRS, the employer never submits it; resolve any discrepancy with the state agency before relying on the certified figures.