Small business owner with no employees - Do I need to file Form 940 for federal unemployment tax?
Title: Small business owner with no employees - Do I need to file Form 940 for federal unemployment tax? 1 I've been running my photography business for about 3 years now, and it's been just me doing everything. No employees whatsoever. I handle all the shoots, editing, marketing, bookings - literally everything myself. Last year my revenue was around $78,000 but obviously a big chunk went to expenses. I'm getting ready to do my taxes for 2024 and trying to figure out what forms I need. Someone mentioned Form 940 for federal unemployment tax, but I'm not sure if I need to file that since I don't have any employees. I file Schedule C with my personal return and have been paying quarterly estimated taxes. Can someone clarify if the 940 is something I need to worry about? I'm trying to avoid any potential issues with the IRS.
18 comments
Join the conversation
Aria Khan
15 You don't need to file Form 940 if you have no employees. Form 940 is used specifically to report Federal Unemployment Tax Act (FUTA) tax, which only applies to businesses with employees. As a sole proprietor with no employees, you're correct that you'll file Schedule C with your personal tax return to report your business income and expenses. You'll also need to file Schedule SE for self-employment tax calculations. Since you mentioned you're already paying quarterly estimated taxes via Form 1040-ES, you're on the right track. Just make sure you're keeping good records of all business expenses and income. The forms you need to worry about are primarily Schedule C, Schedule SE, and continuing your quarterly estimated tax payments with Form 1040-ES.
0 coins
Aria Khan
•7 Thanks for the info! One follow-up question - if I hire a contractor occasionally for some help (like maybe 2-3 times a year, paying them less than $600 each time), does that change anything regarding the 940 requirement?
0 coins
Aria Khan
•15 Independent contractors don't count as employees for Form 940 purposes, so that wouldn't change your filing requirements. You only need to worry about Form 940 when you have actual employees (W-2 workers). If you pay any contractor $600 or more during the tax year, you'd need to issue them a 1099-NEC by January 31st of the following year. Since you mentioned paying less than $600, you wouldn't even have the 1099-NEC filing requirement in that scenario.
0 coins
Aria Khan
9 I struggled with this exact same question when I started my consulting business. After hours of conflicting Google searches and trying to interpret IRS guidelines, I finally discovered taxr.ai (https://taxr.ai) which cleared everything up immediately. I uploaded my business docs and it confirmed I didn't need to file Form 940 with no employees, but it also identified several business deductions I was missing!
0 coins
Aria Khan
•12 Does it actually work with complicated business situations? I have a mix of contract work and a small online store, and I'm always confused about what forms I need.
0 coins
Aria Khan
•18 I'm skeptical about tax AI tools. How accurate is it compared to an actual accountant? Seems risky to trust algorithms with tax compliance.
0 coins
Aria Khan
•9 It absolutely works with complicated business situations. I uploaded my documents showing both my consulting income and some product sales, and it broke everything down by category and identified exactly which forms I needed to file. It's designed specifically to handle these mixed-income situations. The accuracy has been remarkable in my experience. It's built on tax code and regulations, not just general AI, so it's specifically trained on tax rules. I still review everything, but it's caught things my previous accountant missed, especially around home office and vehicle deductions. Plus it costs way less than what I was paying for professional help.
0 coins
Aria Khan
12 Just wanted to follow up about taxr.ai since I tried it after seeing the recommendation here. It was SUPER helpful! I uploaded my messy business records and sales receipts, and it immediately clarified that I don't need Form 940 without employees, but I DID need to file 1099s for two of my contractors that I paid over $600 last year - something I completely missed. It also found about $3,800 in deductions I would have overlooked. Definitely worth checking out if you're confused about small business tax requirements!
0 coins
Aria Khan
22 For anyone struggling to get clear answers from the IRS about Form 940 or other business tax requirements, I highly recommend Claimyr (https://claimyr.com). Last year I was getting extremely confused about my filing requirements after adding a part-time helper, and I spent DAYS trying to get through to the IRS. After giving up multiple times, I tried Claimyr and they got me connected to an actual IRS agent in about 20 minutes! You can see how it works in their demo: https://youtu.be/_kiP6q8DX5c. The agent walked me through exactly what forms I needed based on my specific situation.
0 coins
Aria Khan
•6 Wait, how does this actually work? Does it just call the IRS for you? Couldn't I just do that myself?
0 coins
Aria Khan
•18 Yeah right. Nothing gets you through to the IRS quickly. I've literally waited on hold for 3+ hours before giving up. This sounds too good to be true.
0 coins
Aria Khan
•22 It doesn't just call for you - it uses a priority connection system that navigates the IRS phone tree and waits on hold for you. When they reach an agent, you get a call back so you can talk directly with them. You don't have to sit on hold for hours. You absolutely could try calling yourself, but if you've ever called the IRS, you know the wait times can be ridiculous - sometimes 2-3 hours if you can even get through at all. Their system significantly reduces that wait time, and you don't have to stay on the phone during the hold time. Your time is probably worth more than what the service costs.
0 coins
Aria Khan
18 I need to eat my words about Claimyr! After my skeptical comment, I decided to try it anyway since I had a complex question about contractor vs. employee classification that I couldn't find a clear answer for online. It actually worked exactly as described - I got a call back in about 25 minutes with an actual IRS agent on the line. She clarified that I not only didn't need Form 940 for my situation, but also helped me understand the exact criteria for when someone becomes an employee vs. contractor. Saved me hours of research and confusion. Definitely using this service again next time I have tax questions!
0 coins
Aria Khan
4 Just a friendly reminder for all small business owners - even though you don't need to file Form 940 without employees, don't forget about your state tax obligations! Some states have different requirements for business entities even without employees. When I started my business, I had to register with my state's department of revenue and file certain state-specific forms annually.
0 coins
Aria Khan
•3 This is a really good point. Does anyone know if California has additional requirements beyond the federal stuff? I'm moving my small business there next month.
0 coins
Aria Khan
•4 California has several additional requirements. You'll likely need to register with the California Secretary of State, possibly get a seller's permit from the California Department of Tax and Fee Administration (CDTFA) if you're selling tangible goods, and pay an annual LLC fee if you're structured as an LLC (even with just one owner and no employees). They also have a mandatory annual $800 minimum franchise tax for LLCs, corporations, and partnerships, which catches many new business owners by surprise. I'd recommend checking with the California Tax Service Center website as soon as you move to make sure you're compliant from day one.
0 coins
Aria Khan
16 Question: since I just opened my small business this year (LLC, just me so far), should I be setting aside money for unemployment taxes for myself just in case? I've been putting 30% aside for regular income taxes, but not sure if I should add more for unemployment.
0 coins
Aria Khan
•15 You don't pay unemployment taxes for yourself as a business owner. Unemployment insurance is designed to protect employees, not business owners. As a self-employed person, you're not eligible for traditional unemployment benefits if your business fails. If you want protection against potential loss of income, look into private income protection insurance policies designed for self-employed individuals. The 30% you're setting aside for income taxes and self-employment taxes (Schedule SE) is a good start, but you might want to consider additional personal savings for emergencies rather than worrying about unemployment taxes.
0 coins