Montana Unfiled Payroll Tax Returns Checklist

Montana Unfiled Payroll Tax Returns Checklist

If your business has not filed required withholding tax returns with the State of Montana, you are facing a compliance issue that can grow more serious the longer it remains unresolved.

Montana employers must file an annual withholding tax return when they have employees on their payroll, and the Montana Department of Revenue tracks which employers have submitted these returns and when.

Missing annual filings create gaps in state records and can trigger penalties, interest charges, and collection actions. Understanding what the state requires and what steps to take next can help prevent further complications.

What This Issue Means

An unfiled withholding tax return means your business has not submitted the required annual

Form MW-3 to the Montana Department of Revenue by the January 31 deadline. The state expects employers to file Form MW-3 each year along with all W-2 forms for every employee, regardless of whether any state income tax was withheld.

Why the State Requires This

Montana requires employers to file annual withholding tax returns to track wage withholding and ensure proper income tax collection. When the Department of Revenue reconciles its records, unfiled returns are identified during system reviews or when a business is selected for examination.

What Happens If This Is Ignored

Ignoring unfiled Montana withholding tax returns typically results in the state sending follow-up notices requesting the missing returns and payment of any outstanding amounts. Montana law allows the state to assess or collect tax at any time when a required return has not been filed, meaning there is no statute of limitations for unfiled returns.

The state can file liens against business property and personal property of the owner to secure the debt, and wage garnishment of the owner’s personal wages or garnishment of client payments may also occur. Interest continues to accumulate on unpaid amounts at 10.25 percent per year, which compounds daily at 0.0281 percent.

What This Does NOT Mean

Unfiled Montana withholding tax returns do not automatically mean your business license will be revoked immediately. The state does not suspend licenses without following a formal process that typically includes written notices.

Steps to Address Unfiled Montana Withholding Tax

Returns

1. Gather all notices and documents: Keep all documents in one place so you can reference them as you work through the resolution process, and write down the dates of the notices and any specific references to tax years mentioned.

2. Review your payroll records: Locate employee wage records, withholding amounts, and any payments you made to the state, and identify whether you actually made withholding payments during the unfiled years.

3. Contact the Montana Department of Revenue at 406-444-6900: Request written confirmation of which years need to be filed and by what date, and ask whether there are outstanding balances due and what penalties and interest have been assessed.

4. Gather or reconstruct missing payroll information: Montana requires employers to maintain payroll records for five years, including total wages paid during each pay period and employees' names, Social Security numbers, and wages for each pay period.

Compile a summary that includes total wages paid to all employees and the amount of withholding taxes withheld. Contact former employees, your accountant, or payroll service providers to help reconstruct this information if complete records are unavailable.

5. Obtain current Form MW-3 and instructions: You will also need to prepare W-2 forms for all employees who received wages during each unfiled year, and you must use the current version for each tax year you are filing.

6. Complete the missing annual withholding tax returns: Fill out Form MW-3 for each missing year, prepare all required W-2 forms, and make copies of completed returns for your own records before sending them. Employees must complete Form MW-4 when hired to determine proper state income tax withholding amounts, and reviewing these forms can help verify your payroll tax calculations.

7. Submit completed returns: Include a cover letter explaining that these are late filings for the specified years, and keep proof of mailing or delivery with your records.

8. Address any payment balances: Montana assesses a late filing penalty of the greater of fifty dollars or five percent of the income tax due for each month during which there is a failure to file the return, not to exceed twenty-five percent of the tax due.

Penalty Relief Options

Montana Department of Revenue may waive penalties for reasonable cause, but interest cannot be waived. Reasonable cause means you exercised ordinary business care but were still unable to meet a department deadline, and you must submit your penalty waiver request in writing to the department.

Your request should include specific facts demonstrating why you could not meet the filing deadline despite exercising ordinary business care. The department evaluates each request individually based on the circumstances presented.

After Filing

Once you have filed the missing returns and addressed any outstanding balances, the Montana

Department of Revenue will process your filings. The department does not publish specific processing timeframes for withholding tax returns, so contact your assigned representative or the general assistance line for expected processing times for your submission.

After processing, you may receive a confirmation notice or statement showing that returns have been received and filed. Request written confirmation from the Department of Revenue that the issue has been closed and that all required returns have been received.

Facing State Enforcement or Payroll Tax Issues?

If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.