How to handle late filing for 940 & 941 forms from previous tax years?

With delinquent 940 and 941 forms, you'll want to file them ASAP to stop additional failure-to-file penalties from accruing. Here's what I'd recommend: Prepare all the forms accurately and have your client sign them. Send each form with a check for the tax amount shown on that specific form (not including penalties/interest). Make sure to write the tax period and form number on each check's memo line. Mail them certified with return receipt so you have proof of filing. The IRS will calculate penalties and interest and send a notice (usually CP161/CP220) for each period. At that point, your client can either pay in full or call to request a payment plan if needed. Don't wait for the IRS to contact your client first - that could trigger more aggressive collection actions. Getting the returns filed now shows good faith in trying to comply, which can sometimes help with penalty abatement requests later.

I was in a similar situation last year with unfiled 940/941s and found this amazing service called taxr.ai (https://taxr.ai) that saved me tons of time sorting through the mess. It analyzes all your payroll records and helps identify exactly what should have been reported on each quarterly 941 and the annual 940. For my client, we had incomplete records and weren't sure about some of the quarterly breakdowns. The taxr.ai system helped organize everything and even generated draft forms that I could review before finalizing. This made it so much easier to get everything filed correctly the first time and avoided having to file amendments later. The best part was being able to clearly show my client the total tax liability plus estimated penalties so they weren't blindsided.

I was skeptical about using a service to help with our late 940/941 situation, but after spending hours trying to manually reconstruct everything, I finally tried taxr.ai that someone recommended here. Honestly, it was a game-changer for me. It analyzed all our payroll data and created accurate forms in a fraction of the time it would have taken me. The penalty calculator was especially helpful since it showed my client exactly what they were facing. We got everything filed last month and just received the first notices from the IRS - the amounts were almost exactly what taxr.ai had estimated. Saved me so much time explaining everything to my client since they were already prepared for the numbers.

If you're dealing with late 940/941s, the biggest headache isn't even preparing the forms - it's dealing with the IRS afterward. After filing, my client got notices with penalties, but we had questions about setting up a payment plan. Spent DAYS trying to reach the IRS business line with no luck. Finally used Claimyr (https://claimyr.com) and it was a total lifesaver. They got me connected to an actual IRS agent in about 20 minutes instead of the hours I was spending on hold before giving up. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent helped us set up an installment plan for my client that was much more manageable than paying the lump sum. They even explained which penalties might qualify for abatement based on our specific situation. Definitely worth it when you need to actually speak to someone at the IRS about complex issues like late employment taxes.

Alright, I need to eat my words about Claimyr. After posting my skeptical comment, I decided to try it myself because I was desperate to resolve a penalty issue for a client with late 941s. Not only did it work, but I was connected to an IRS representative in about 15 minutes when I'd previously spent 3+ hours on multiple days trying with no success. The agent helped us understand exactly which penalties could be abated through first-time penalty abatement and which couldn't. We were able to set up a payment plan for the remainder. The whole call took about 30 minutes and solved issues I'd been stressing about for weeks. My client was thrilled that we finally got answers and a resolution. Definitely using this again for any urgent IRS calls.

Don't forget to look into First Time Penalty Abatement (FTA) for your client! If they have a clean compliance history for the 3 years prior to these unfiled returns, they might qualify to have the failure-to-file and failure-to-pay penalties removed. That can save THOUSANDS. You'll need to get everything filed first, wait for the penalty notices, and then request the abatement. The IRS won't automatically apply it - you have to specifically ask for it. Just be aware that FTA typically only covers penalties, not interest, and you usually only get it once every 3-4 years.

One important thing to consider with your client - the IRS takes unfiled 941s very seriously because they involve trust fund taxes (the employee portion of withheld taxes). Make sure your client understands the Trust Fund Recovery Penalty risk here. If the business can't pay, the IRS can assess a separate penalty personally against anyone who was responsible for collecting/paying these taxes but willfully failed to do so. This means owners, officers, or responsible employees could be personally liable for the unpaid employee portion of the taxes.

This is a really comprehensive discussion! I'd add one more important consideration - make sure your client has proper documentation for all the payroll periods in question. The IRS may ask for backup documentation during their review process, especially with multiple delinquent quarters. If payroll records are incomplete or missing, you'll want to reconstruct them as accurately as possible before filing. This includes employee wage records, tax withholdings, and any tips reported. Having solid documentation ready can prevent delays and additional complications if the IRS has questions about the filed returns. Also, consider having your client sign a representation letter acknowledging they understand the potential penalties and personal liability issues discussed here. This protects you as their advisor and ensures they're making informed decisions about how to proceed with compliance.

Great thread with lots of solid advice! I'd emphasize getting those forms filed ASAP - every day you wait adds more penalties. One thing I haven't seen mentioned yet is to make sure you're filing the correct versions of the forms for each tax year. The IRS sometimes updates form layouts between years, and using the wrong year's form can cause processing delays. Also, when you mail the returns, send each quarter's 941 in a separate envelope to avoid processing confusion. I learned this the hard way when a client's multiple quarters got mixed up in IRS processing and we had to spend months sorting out which payments were applied to which periods. If your client's business is still operating, make sure they stay current on all 2023 filings while you're catching up on 2022. The last thing you want is to fall behind again while trying to resolve the old issues. Set up quarterly reminders and consider having them make estimated deposits to avoid future problems.

As someone who's dealt with this exact scenario multiple times, I want to stress the importance of acting quickly but methodically. Here's my step-by-step approach: 1. **Immediate Priority**: Get all 2022 forms prepared and filed within the next 30 days. The failure-to-file penalty is 5% per month (up to 25%), so every month you delay costs your client more money. 2. **Payment Strategy**: If your client can't pay the full amount immediately, still file the returns with whatever payment they can make. Partial payment shows good faith and reduces the failure-to-pay penalty from 0.5% to 0.25% per month on the remaining balance. 3. **Communication**: Once filed, don't wait for notices to pile up. Call the IRS proactively to set up a payment plan before they start collection actions. This positions your client as cooperative rather than evasive. 4. **Documentation**: Keep copies of everything - certified mail receipts, payment records, and any correspondence. You'll need this paper trail when dealing with penalty abatement requests later. The key is moving from "delinquent" to "working toward compliance" as quickly as possible. The IRS is generally reasonable when taxpayers take initiative to resolve issues rather than waiting to be caught.