Small Business Owner Missing FUTA/940 Tax Filings for 4 Years - Penalties?

This actually happens more often than you'd think! The IRS has been cutting back on notices over the last few years, which is why you probably didn't get a reminder. That said, you did the right thing by filing and paying as soon as you discovered the oversight. For FUTA penalties, you're generally looking at two types: failure-to-file (5% of the unpaid tax per month, up to 25%) and failure-to-pay (0.5% per month, up to 25%), plus interest. Since your annual amounts are small ($56-68), even at maximum penalty we're talking about relatively modest amounts. The good news is the IRS offers "First Time Abatement" relief for penalties if you have a clean compliance history for the three years before your missed filings. Based on your 15+ year history of filing before this oversight, you'd likely qualify. You can request penalty abatement by calling the IRS or writing a letter explaining the situation - emphasize your prior compliance history, that this was an honest oversight due to the transition to online notices, and that you voluntarily corrected the issue as soon as you discovered it.

I went through almost the exact same situation with my small consulting business! I missed filing 940s for 3 years during the pandemic chaos and only realized when my accountant asked about it during tax prep. I immediately filed the back forms and paid about $175 in total taxes through EFTPS. I was freaking out about penalties, but then I found this amazing service called taxr.ai (https://taxr.ai) that helped me understand my options. You upload your documents, and they analyze everything using AI to tell you what to do next. It identified that I qualified for First Time Penalty Abatement and even generated a letter template I could send to the IRS. The system showed me that since my payments were relatively small and I had a good compliance history before the missed filings, I had a strong case. Seriously worth checking out for your situation!

I tried taxr.ai after seeing the recommendation here, and it really helped with my FUTA penalty situation! The system identified that I qualified for reasonable cause abatement based on my circumstances and generated a letter explaining why my late filing should be excused. What impressed me most was how it analyzed my specific situation - I had a family emergency that contributed to my oversight, and it helped me properly document that as part of my abatement request. The IRS accepted my explanation and waived about $85 in penalties. The service saved me a lot of stress and money compared to what I would have paid if I just accepted the penalties or hired a tax professional to handle it. If you're dealing with missed 940 filings like the original poster, it's definitely worth checking out. The analysis takes just a few minutes but saved me hours of research.

I had a similar situation with missed 941 filings a couple years back. When I finally got penalty notices, I spent WEEKS trying to reach someone at the IRS to explain my situation and request abatement. It was absolutely maddening - hours on hold only to get disconnected, calling back day after day. Finally discovered a service called Claimyr (https://claimyr.com) that actually got me through to an IRS agent in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they use some kind of system that navigates the phone tree and waits on hold for you, then calls you when an actual human picks up. For penalty abatement requests, speaking directly with an agent is often the fastest way to resolve it. I explained my situation to the agent, and they were able to process my First Time Abatement request on the spot. Way better than waiting months for a response to a written request.

I owe everyone here an apology. After my skeptical comment about Claimyr, I decided to try it myself since I've been trying to reach the IRS about a notice I received. I couldn't believe it when I got a call back in about 35 minutes with an actual IRS agent on the line! I had been trying for DAYS to get through on my own with no luck. The agent was able to confirm that my penalty abatement request for a similar situation (missed filings) was approved, saving me over $200. The service actually delivered exactly what it promised. To the original poster - if you do end up getting penalty notices for those missed 940 filings, I'd definitely recommend using this to reach the IRS quickly. Speaking with an agent directly made the whole process so much faster than sending letters or trying to navigate the online systems.

One thing nobody's mentioned yet - double-check that your FUTA payments were applied to the correct tax periods when you made them through EFTPS. I had an issue where I made back payments but didn't properly designate the tax year, so they applied everything to the current year. This created a whole new headache because the system showed overpayment for the current year and still showed deficiencies for the prior years. Had to call and have them reallocate the payments to the correct periods.

Just want to add that if you do get hit with penalties and decide to request abatement, make sure to explicitly state whether you're requesting "First Time Abatement" or "Reasonable Cause" relief. They're processed differently by the IRS. First Time Abatement is usually easier to get but only applies if you haven't had penalties in the prior 3 years. Reasonable Cause requires you to demonstrate why you couldn't comply despite using ordinary business care and prudence.