Unfiled 2017 Form 940: How to File, Penalties, and Relief Options

Form 940 is central to funding unemployment benefits through the federal unemployment tax system. Employers must file this tax return annually to report and accurately pay FUTA taxes. The 2017 Form 940 carries the same importance, even if it remains unfiled for years. Filing ensures compliance with federal law and protects businesses from escalating IRS problems.

Leaving an unfiled 2017 Form 940 unresolved exposes businesses to severe financial and legal consequences. Penalties accumulate quickly from the original due date, increasing overall liability. Interest compounds daily on unpaid balances, making eventual resolution significantly costlier. IRS collection actions, including liens, levies, and aggressive enforcement against business assets and accounts, may follow.

This guide explains each step needed to properly resolve an unfiled 2017 Form 940. It provides instructions for obtaining forms for the prior years and calculating the federal unemployment tax. Readers will learn about penalties, interest, and potential resolution options from the IRS. By following this guide, businesses can regain compliance, minimize costs, and protect themselves from ongoing enforcement actions.

Understanding Form 940 and Federal Unemployment Tax

The Form 940 is an important tax form that employers must file annually to report federal unemployment obligations. This section explains why the form exists, how it differs from other payroll tax requirements, and what the 2017 FUTA tax rate means for your business. By understanding the details, an employer can prevent penalty assessments and ensure every tax return is complete and correct.

Purpose of Form 940 in the Federal Unemployment Tax Act System

• Annual Requirement: Employers must file Form 940 annually to report and pay FUTA taxes to the Internal Revenue Service.
  
  
• Support for Benefits: The FUTA system provides funding for state unemployment programs that support employees who lose their jobs.
  
  
• Federal Obligation: Unlike other taxes, FUTA is a federal requirement that applies regardless of state payroll compliance.
  
  
• Compliance Protection: Filing the tax form on time helps avoid IRS enforcement actions, notices, and added penalty charges.

How Federal Unemployment Taxes Differ from Other Employment Taxes

• Employer Liability: The employer pays FUTA taxes, unlike federal income tax or social security, which are withheld from employee wages.
  
  
• No Withholding: FUTA cannot be deducted from employee pay, making it solely the employer’s responsibility to deposit and report.
  
  
• Separate Purpose: FUTA is distinct from payroll tax requirements tied to income tax and retirement benefits.
  
  
• Administrative Distinction: FUTA forms are reviewed and processed differently from other IRS tax returns each year.
  
  

2017 FUTA Tax Rate and How State Unemployment Taxes Provide Credits

• Standard Rate: For 2017, FUTA applied 6.0 percent on the first $7,000 of employee wages.
  
  
• State Credits: Employers could receive up to a 5.4 percent credit for timely payment of state unemployment taxes.
  
  
• Credit Reduction: If a state owed federal loans, employers in that state faced reduced credits and higher FUTA liability.
  
  
• Example Calculation: An employer who paid $7,000 in wages for one employee would typically owe only $42 after credits.

In summary, the unfiled 2017 Form 940 represents more than just a late tax return; it reflects missed steps in fulfilling business obligations. By learning the differences and applying the correct guidance, users can avoid penalty charges and maintain compliance with the IRS.

Who Must File Form 940 Tax Return

The Form 940 tax return applies broadly, but not every employer must file. Below are the detailed rules determining who must comply, including general thresholds, special cases, and exemptions. Understanding these rules helps businesses avoid penalty charges and ensures the IRS receives the correct report.

• General Filing Thresholds: An employer must file Form 940 if they pay wages of $1,500 or more in any calendar quarter.
  
  
• Employee Requirement: An employer must file if one or more employees worked at least one day in 20 weeks.
  
  
• Payroll Coverage: These payroll tax obligations apply regardless of federal income tax withholding or social security contributions.
  
  
• IRS Enforcement: If these requirements are ignored, the IRS may issue a notice and charge the account with penalty charges.
  
  
• Agricultural Employers: Farmers must file if they pay wages of $20,000 or more to farmworkers in any quarter.
  
  
• Worker Number: Farmers must file if they employ 10 or more farmworkers during at least 20 weeks in the year.
  
  
• Example Application: A farm that paid seasonal workers above these thresholds must complete the form by the correct due date.
  
  
• IRS Review: Agricultural filings are reviewed carefully because of seasonal payroll and unique deposit rules for FUTA taxes.
  
  
• Exempt Organizations: Tax-exempt charities under section 501(c)(3) are not subject to FUTA and need not file Form 940.
  
  
• Government Entities: State and local government departments are generally exempt from federal unemployment obligations.
  
  
• Tribal Governments: Federally recognized tribes are exempt but may file voluntarily to receive FUTA system protections.
  
  
• IRS Confirmation: Employers should check official IRS resources or seek professional tax guidance if they are uncertain about the exemption status.

Knowing who must file prevents errors and protects a business from late penalty charges. Employers can visit the IRS site, learn the rules for prior years, and follow the right steps to remain compliant.

Step-by-Step Filing Process for Unfiled 2017 Form 940

Filing an unfiled 2017 Form 940 requires structured steps to ensure accuracy and compliance with the IRS. Each step involves specific tasks that help an employer prepare, calculate, and report the correct taxes due. The details below explain what this tax form requires and how to avoid penalty assessments.

Obtain Correct Prior Years' IRS Forms and Instructions

• Access the official IRS site: Visit the IRS website to download the 2017 Form 940 and the matching instructions.
  
  
• Use prior years’ forms: Always use the tax form for the specific year filed to ensure correct calculations.
  
  
• Attach required schedules: Include Schedule A if you paid wages in multiple or credit reduction states.
  
  
• Check guidance: Follow only IRS resources to avoid outdated information from third-party sources.

Gather Business Details, EIN, Payroll, and State Tax Records

• Employer Identification Number: Enter your EIN exactly as the Internal Revenue Service assigns.
  
  
• Payroll records: Collect all employee wages paid during 2017 for accurate FUTA calculations.
  
  
• State tax accounts: Gather deposit and payment details for all state unemployment insurance accounts.
  
  
• Business address: Verify the address and contact details match what the IRS has on file.

Complete the Return Header and Identification Accurately

• Correct identification: Provide the legal business name, trade name, and address as previously reported to the IRS.
  
  
• Select return type: Check if the return is original, amended, or filed as a successor employer.
  
  
• Enter accurate details: Avoid errors by carefully filling in every required line on the first page.
  
  
• Prevent IRS notices: Submitting a complete and accurate header reduces processing delays and IRS notice issues.

Report Single-State or Multi-State Unemployment Tax Details

• Single state filing: Select the state abbreviation if all wages were subject to one state’s unemployment system.
  
  
• Multiple states: Attach Schedule A if you had employees across more than one state.
  
  
• Credit reduction states: Note additional FUTA liability if you pay wages in credit reduction states.
  
  
• IRS review: These details are reviewed closely, so accuracy is essential for preventing penalty assessments.

Calculate Gross Wages, Taxable FUTA Wages, and Credits for State Taxes

• Report total wages: Enter all employee wages paid during 2017, including salary, bonuses, and taxable benefits.
  
  
• Subtract exemptions: Deduct payments not subject to FUTA, such as retirement contributions or qualified benefits.
  
  
• Apply wage base: Limit FUTA liability to the first $7,000 of each employee’s wages.
  
  
• Apply credits: Receive up to 5.4 percent credit for timely paid state unemployment taxes.

Reporting Quarterly FUTA Liability if Above Deposit Thresholds

• Threshold review: If FUTA liability exceeds $500, report quarterly liability on Part 5 of the form.
  
  
• Deposit requirement: Pay liability exceeding $500 using electronic deposit or IRS-approved payment methods.
  
  
• Example calculation: An employer owing $600 must make a deposit rather than wait to pay at year-end.
  
  
• IRS system: The IRS uses this report to verify deposits and assess late penalty charges if missed.

Sign, Date, and File Return by Mail (2017 Returns Cannot Be E-Filed)

• Authorized signature: Sign and date the form under penalties of perjury.
  
  
• Attach preparer details: If a tax professional prepared the tax return, their information must also be entered.
  
  
• Mail submission: Send the completed tax form to the correct IRS department for processing.
  
  
• Keep records: Keep a copy of the filed form and proof of mail submission for your account.

Following these steps helps ensure the unfiled 2017 Form 940 is properly filed, minimizing penalty risks and maintaining business compliance.

IRS Penalties and Interest for Late Form 940 Tax Return

The IRS enforces strict rules when an employer leaves the Form 940 tax return unfiled after the original due date. The failure-to-file penalty is 5 percent monthly, capped at 25 percent of the balance owed. This penalty applies immediately, even if the employer later submits a payment. Businesses must act quickly to avoid maximum charges that build from the first missed day.

The failure-to-pay penalty is lower but still dangerous when combined with filing penalties. The IRS charges 0.5 percent monthly until the taxes are paid. These penalties run concurrently, but the filing penalty drops slightly to 4.5 percent monthly. Together, they increase liability faster than many business owners expect, especially with older prior-year accounts.

The failure-to-deposit penalty applies when employers miss required FUTA deposits throughout the year. This penalty ranges from 2 to 15 percent, depending on the amount overdue. Interest compounds daily on all unpaid taxes, magnifying the balance significantly over several years. For example, a $2,000 FUTA liability could exceed $3,500 after accumulated penalties, interest, and IRS enforcement actions.

Related Employment Tax Issues and Prior Years' Considerations

Unresolved Form 940 tax return problems often appear alongside other employment tax issues, especially when the IRS investigates multiple prior years. Below are the key connections and consequences employers must understand to avoid further liability.

• Connection with Other Forms: The Form 940 tax return reports FUTA, while Forms 941, 943, and 944 cover income tax and social security withholding.
  
  
• Overlapping Compliance: An employer with missing 940 filings may also have payroll tax issues with quarterly or annual reporting obligations.
  
  
• Example of Errors: If wages are not fully reported on Form 941, the IRS may question FUTA calculations on Form 940.
  
  
• IRS Review: The IRS compares multiple forms across years to identify inconsistencies, late filings, or unaddressed liabilities.
  
  
• TFRP Overview: The Trust Fund Recovery Penalty allows the IRS to collect unpaid federal income tax and Social Security from responsible persons.
  
  
• Responsible Individuals: The penalty may apply to officers, shareholders, or others who pay creditors instead of meeting tax obligations.
  
  
• Willful Neglect: The IRS issues a notice if it determines an individual knowingly failed to deposit withheld employee taxes.
  
  
• Harsh Consequences: The TFRP can extend liability beyond the business and impact the personal assets of those held accountable.
  
  
• Prior Years' Impact: Unfiled prior years' employment tax returns make current compliance harder and invite closer IRS review and scrutiny.
  
  
• Penalty Accumulation: Each unresolved year increases the employer's penalty, interest, and IRS enforcement risks.
  
  
• Resolution Steps: To restore compliance, employers must file all missing returns, settle balances, and follow IRS guidance.
  
  
• Professional Guidance: Working with a tax professional helps ensure correct forms, accurate payment, and efficient resolution of prior years' issues.

Failing to manage related employment tax obligations alongside an unfiled 2017 Form 940 magnifies IRS risks and delays compliance restoration.

Resolution Options if You Owe on an Unfiled 2017 Form 940

Several resolution strategies are available when an employer owes the IRS for an unfiled 2017 Form 940. Each option depends on the balance, the business's financial situation, and IRS eligibility requirements. Below are the main tools that can help reduce liability and restore compliance.

• Installment Agreements: The IRS offers guaranteed, streamlined, regular, and partial payment installment agreements for different tax return balances.
  
  
• Guaranteed Plan: Small debts under $10,000 qualify for guaranteed agreements if the employer can pay in full within three years.
  
  
• Streamlined Plan: Debts under $50,000 may qualify for streamlined agreements requiring a monthly payment without an extensive financial review.
  
  
• Regular and Partial Plans: Larger debts require detailed financial information, with partial payment accepted if full collection is unlikely.
  
  
• Penalty Relief: The IRS allows a first-time abatement to remove penalties if the prior compliance history is clean.
  
  
• Reasonable Cause: Relief may apply if failure to file was due to illness, disaster, or unavoidable business errors.
  
  
• Administrative Waiver: The IRS occasionally grants penalty waivers when policy changes or IRS notices caused noncompliance.
  
  
• Documentation Required: Employers must submit a clear explanation and evidence when requesting penalty relief.
  
  
• Offer in Compromise: An OIC allows settlement for less than the full taxes owed based on eligibility.
  
  
• Doubt as to Liability: This option applies when there is a genuine dispute about the correct tax assessment.
  
  
• Doubt about Collectibility: The IRS may accept less if financial resources cannot cover the balance.
  
  
• Hardship Grounds: The IRS may settle if complete collection would create extreme business hardship or an unfair financial burden.
  
  
• Currently Not Collectible: CNC status places the account on hold when the employer proves they cannot pay at this time.
  
  
• Proof of Hardship: Employers must submit income and expense records showing that payments would prevent the coverage of basic wages and operations.
  
  
• Temporary Relief: The IRS halts collection actions but may notify employers of accruing interest and penalties.
  
  
• Review Process: CNC is reviewed regularly, and status may change if financial conditions improve.

Resolving an unfiled 2017 Form 940 requires selecting the right IRS program to minimize costs and restore compliance.

Preventing Future Form 940 Compliance Issues

Employers can prevent future Form 940 issues by maintaining complete and accurate payroll tax records for at least four years. These records must include employee wages, tax deposits, and all prior tax return filings. Organized records allow businesses to provide documentation when the IRS requests verification quickly. Accurate recordkeeping reduces the risk of penalty assessments and supports smoother compliance during audits or reviews.

Using reliable payroll software or hiring a qualified tax professional helps employers comply with FUTA and related requirements. Payroll systems automatically calculate FUTA liability, track deposits, and update rates when IRS rules change. Professional services guide correcting errors and handling complex cases such as multi-state payroll. Employers who invest in professional or automated support avoid mistakes that often lead to costly IRS notices.

Employers should also set clear reminders for quarterly deposit deadlines and the annual Form 940 due date. Consistent scheduling ensures taxes are filed on time and prevents late fees or accumulated interest. Proactive communication with the IRS can resolve potential issues before they escalate into notices or enforcement. By combining records, technology, and professional support, businesses protect themselves from repeated compliance problems and safeguard financial stability.

Frequently Asked Questions

How long must the IRS collect my unfiled 2017 Form 940 tax return?

The IRS generally has ten years from the assessment date to collect unpaid Form 940 taxes. However, the statute of limitations does not begin until you file the tax return. The IRS can pursue collection indefinitely if the 2017 Form 940 remains unfiled. Filing the return, even late, starts the collection clock and prevents the debt from being legally collectible forever.

Can I e-file my 2017 Form 940?

No, the IRS only allows electronic filing of current-year and select recent tax forms. The 2017 Form 940 cannot be submitted electronically. You must download the prior-year version from the IRS site, complete it, and mail it to the appropriate IRS department. Sending a paper return by certified mail ensures proof of filing and prevents unnecessary notice delays.

What if I can’t find my prior years' payroll records?

If you cannot locate prior payroll records, you should attempt to reconstruct them using bank statements, W-2 forms, or state report filings. The IRS can also provide wage and income tax transcripts that reflect reported employee wages. While exact records are preferred, the IRS accepts reasonable efforts to rebuild missing information. Employers should work with a tax professional to ensure reconstructed records are complete and accurate before filing the tax form.

Should I file if I can’t pay the full amount now?

Yes, you should still file Form 940 even if you cannot pay the full balance immediately. Filing stops the 5 percent monthly failure-to-file penalty and starts the ten-year IRS collection statute. You can then request a payment plan, apply for penalty relief, or negotiate another resolution option. Filing first demonstrates good faith and reduces long-term costs compared to leaving the tax return unfiled.

Do late state unemployment tax payments still count as credits?

Late state unemployment tax payments may still provide partial credits against your FUTA liability, but timing is critical. To qualify for the maximum 5.4 percent FUTA credit, state taxes must be paid by the due date. Payments made after that date reduce your credit, increasing your federal unemployment taxes owed. You should still report late payments on the form, as partial credit can lower your overall liability.