An unfiled 2018 Form 940 still matters in 2024 because IRS penalties and interest continue compounding annually. Employers face ongoing financial exposure until they address the overdue filing directly with the IRS. Even though 2018 has passed, the IRS collection authority lasts ten years after assessment. Filing now reduces future liability and begins the clock on available resolution programs.

Ignoring overdue filings exposes employers to escalating monthly IRS penalties until they reach statutory limits. The IRS can also place liens or levies against business or personal assets to collect unpaid payroll taxes. Interest accumulates daily on the original tax and any penalties, significantly inflating the final balance owed. These consequences create long-term risks that may jeopardize business operations and personal financial security.

This guide provides practical instructions for filing an unfiled 2018 Form 940 with the IRS. It explains each step, including locating prior-year forms, gathering payroll records, and calculating correct FUTA tax amounts. Readers will also learn about penalties, interest, and possible abatement or relief programs. Finally, the guide covers resolution options like payment plans, offers in compromise, and strategies for avoiding future compliance issues.

What is Form 940 and Why It Matters for Payroll Taxes

Form 940 plays a critical role in how businesses handle payroll taxes, and its impact goes far beyond one filing year—understanding why this tax form matters will help employers meet their tax obligations and avoid severe consequences. Here are the key points to consider when addressing Form 940 and the risks of an unfiled 2018 Form 940.

• Purpose of Form 940: The Internal Revenue Service requires employers to file Form 940 to report federal unemployment tax on employee wages. This tax return covers unemployment tax obligations and ensures funds are available for workers who lose jobs. Employers must complete this form correctly to comply with federal tax regulations. Filing the tax form properly can trigger IRS notices and significant penalties.
  
  
• FUTA Tax Basics for 2018: For the 2018 tax year, employers calculated federal unemployment tax at six percent of the first $7,000 in employee wages. Credits of up to 5.4 percent applied if state unemployment taxes were fully paid on time. The balance owed depended on deductions, deposits, and compliance with IRS rules for that calendar quarter. Taxpayers who failed to report income correctly faced hefty penalties and additional interest charges.
  
  
• Filing Deadline and Consequences: The 2018 Form 940, covering prior years’ payroll tax obligations, was due on January 31, 2019. Employers who delayed filing became subject to late filing penalties, interest, and collection programs for unpaid taxes. The IRS imposes additional charges for each partial month of delay, making the balance grow quickly. A tax attorney or professional can provide guidance, resources, and representation if a business receives a notice.

Form 940 remains vital because it ties together employee wages, unemployment tax, and compliance with federal law. Businesses that file accurately, review records, and contact a CPA or accountant on time reduce the risk of IRS enforcement. Employers must understand this process to protect funds, maintain compliance, and avoid long-term consequences.

Understanding 2018 Form 940 Filing Requirements and Due Date

Understanding the 2018 Form 940 filing requirements is essential because the IRS enforces strict payroll tax compliance rules. Employers must know when they are required to file, what tax rate applies, and how special circumstances affect their tax obligations. Below, you will find the key areas that determine whether a business needs to file the 2018 Form 940 and what the due date means for compliance.

IRS General Tests for Filing Obligations

• Wage Threshold Requirement: An employer must file Form 940 if they paid at least $1,500 in employee wages during any calendar quarter in 2017 or 2018.
  
  
• Employee Count Test: An employer must file if they had one or more employees working for at least some part of a day in 20 or more weeks during 2017 or 2018.
  
  
• Employer Responsibility: Even small businesses with part-time or seasonal employees must review records to determine whether these filing tests apply.
  
  
• Compliance Enforcement: The IRS penalizes taxpayers who ignore these rules and fail to file when required.

FUTA Tax Rate and Available Credit for 2018

• Standard FUTA Rate: In 2018, the federal unemployment tax rate was six percent of the first $7,000 in wages paid to each employee.
  
  
• Credit for State Taxes Paid: Employers who pay state unemployment taxes on time and in full could claim up to a 5.4 percent credit.
  
  
• Effective Tax Burden: With the maximum credit, most businesses paid only 0.6 percent in federal unemployment tax on covered wages.
  
  
• IRS Guidance: Employers had to calculate credits accurately to avoid errors that could trigger IRS notices or additional tax assessments.

Impact of Credit Reduction States and Schedule A

• Credit Reduction States: Employers in states that borrowed federal funds for unemployment benefits and failed to repay on time lost part of their FUTA credit.
  
  
• Schedule A Requirement: If a business paid wages in a credit reduction state in 2018, it had to file Schedule A with Form 940.
  
  
• Additional Tax Liability: Employers in these states owed more federal unemployment tax than employers in states without credit reduction status.
  
  
• IRS Monitoring: The IRS reviewed employer filings carefully to ensure correct reporting and to collect the balance of unpaid taxes.

Meeting the filing requirements for the 2018 Form 940 was not optional because the due date of January 31, 2019, carried full enforcement weight. Employers who reviewed their payroll records, claimed credits correctly, and filed all required forms avoided costly penalties and IRS collection actions.

Step-by-Step Filing Instructions for an Unfiled 2018 Form 940

Filing an unfiled 2018 Form 940 requires precision, because the IRS carefully reviews prior-year payroll tax returns. Employers must follow specific steps to locate the correct forms, gather records, and complete calculations accurately. Below are the core filing instructions that help taxpayers bring their accounts back into compliance.

1. Obtain the Correct Form: The Internal Revenue Service provides prior-year forms, including the 2018 Form 940, on its official IRS.gov page. Employers must download the tax form and the official instructions to ensure accuracy. Using the wrong year’s form delays processing and can cause additional notices. Always confirm that the page and resources correspond to the correct tax year.
   
   
2. Gather Payroll Records: Employers need complete payroll records showing employee wages for each calendar quarter in 2018. Records must include payroll deposits, unemployment tax payments, and any deductions withheld from wages. Supporting documents like Forms 941, state unemployment reports, and bank statements help verify balances. Accurate records reduce the risk of IRS challenges or penalties for incomplete information.
   
   
3. Review Key Parts of the Form: The return requires employer information, including business name, EIN, and address, entered exactly as registered. Employers must report taxable wages, calculate unemployment tax, and apply available credits for state taxes paid. The tax calculation determines unpaid balances, which must be reviewed before signing the return. Any errors can lead to penalties or rejection of the completed tax return.
   
   
4. File and Pay Late Returns: Employers must mail the completed 2018 Form 940 to the correct IRS address listed in the instructions. Payments for unpaid taxes, penalties, and interest can be made electronically or by check. Filing late reduces failure-to-file penalties, but interest and other charges continue until balances are fully paid. Taking action immediately helps employers minimize penalties and regain compliance with federal tax law.

Following these steps ensures an unfiled 2018 Form 940 is completed properly, reported accurately, and filed in compliance with IRS regulations.

IRS Penalties and Interest for Late Filing of Prior Years Form 940

The IRS enforces strict rules when employers fail to submit payroll tax returns, like the 2018 Form 940, on time. Each type of penalty increases the balance owed, and interest compounds daily until the tax account is fully paid. Below is a breakdown of the main penalties and interest calculations that apply to late filings of prior years' Form 940.

Failure to File Penalty and How It Is Calculated

• Monthly Accrual: The IRS imposes a failure-to-file penalty of five percent of unpaid taxes for each partial month late.
  
  
• Maximum Limit: This penalty continues to accrue until it reaches 25 percent of the unpaid balance.
  
  
• Minimum Penalty: If the return is more than 60 days late, the minimum penalty applies, which is a flat dollar amount.
  
  
• Enforcement: Employers who fail to file remain subject to these penalties until the IRS receives the correct tax form.

Failure to Pay Penalty and Interaction with Filing Penalties

• Monthly Rate: The IRS adds a failure to pay penalty of 0.5 percent for each month unpaid taxes remain outstanding.
  
  
• Combined Penalty Rule: When both penalties apply, the failure to file penalty is reduced by the amount of the failure to pay penalty.
  
  
• Maximum Exposure: This penalty caps 25 percent of the unpaid tax balance.
  
  
• Practical Impact: Businesses that file but do not pay still face ongoing charges until the balance is satisfied.

Failure to Deposit Penalty Rates and Timelines

• 1–5 Days Late: The IRS charges a two percent penalty for missed deposits within five days.
  
  
• 6–15 Days Late: The penalty increases to five percent for deposits paid within this timeframe.
  
  
• More than 15 Days Late: Employers pay a 10 percent penalty for late deposits beyond this point.
  
  
• After IRS Notice: If payment is not made within 10 days of an IRS notice, the penalty rises to 15 percent.

Daily Compounding Interest on Both Tax and Penalties

• Ongoing Charges: The IRS charges interest on unpaid taxes, penalties, and previous interest amounts.
  
  
• Compounding Rule: Interest compounds daily, making the balance grow faster than most commercial loan rates.
  
  
• Quarterly Adjustment: The IRS sets the interest rate each quarter based on federal short-term rates plus three percent.
  
  
• Impact on Employers: Businesses face increasing costs the longer they delay payment, even if penalties have maxed out.

Example Calculation Showing How Costs Grow Over Time

1. Base Liability: Assume an employer owed $2,000 in FUTA taxes for 2018.
   
   
2. Failure to File Penalty: After several months, the penalty reaches its maximum of $500 (25 percent of tax).
   
   
3. Failure to Pay Penalty: An additional $500 accrues over time until capped at 25 percent.
   
   
4. Interest Charges: Daily compounding interest adds hundreds of dollars, pushing the total balance beyond $3,000.

Understanding these penalties and interest rules shows why the late filing of prior years' Form 940 creates long-term financial problems. Employers who file quickly, pay outstanding balances, and maintain compliance reduce current and future risks with the IRS.

Trust Fund Recovery Penalty Considerations in Employment Tax Return Cases

FUTA is classified as an employer-only tax, which means employees do not contribute to this unemployment tax. Employers file Form 940 to report FUTA and are responsible for making timely payments. Because FUTA is not withheld from employee wages, it does not qualify as a trust fund tax. However, failing to file or pay FUTA still creates liabilities that the IRS will actively pursue.

Even though FUTA is not a trust fund tax, trust fund penalties can still affect employers with unfiled returns. If an employer fails to file or pay Form 941, the unpaid taxes may include withheld Social Security and Medicare. These withheld amounts are trust fund taxes because they come directly from employee wages. The IRS imposes the Trust Fund Recovery Penalty when these withheld funds are not deposited as required.

Under the TFRP rules, the IRS can hold certain individuals personally responsible for unpaid trust fund taxes. Corporate officers, partners, or anyone with authority over payroll funds may be targeted if they fail to comply. FUTA and trust fund liabilities create overlapping compliance risks when multiple employment tax forms remain unfiled. Understanding these risks helps employers and responsible individuals avoid personal exposure and maintain compliance with federal tax regulations.

Resolution Options for Delinquent 2018 Form 940 with Help from a Tax Attorney

When an employer faces an unfiled 2018 Form 940, several IRS resolution programs can reduce penalties and manage unpaid balances. A tax attorney or professional can guide businesses through these programs, ensuring compliance and protecting financial stability. Below are the primary resolution options available for delinquent Form 940 cases.

• Installment Agreements: Employers can request guaranteed, streamlined, or full financial analysis agreements based on the total amount they owe. Guaranteed agreements apply to small balances under $10,000 if the employer can pay within three years. Streamlined agreements simplify payment arrangements for balances up to $50,000 without requiring full financial disclosure. Larger balances require detailed financial records reviewed by the IRS for approval.
  
  
• Penalty Relief Options: If the employer has a clean compliance history, the IRS allows penalty removal through First Time Abate. Reasonable cause relief applies if natural disasters, illness, or missing records prevented timely filing or payment. Employers must provide documentation supporting their claim to qualify for reasonable cause abatement. A tax attorney can prepare explanations and gather records to strengthen penalty relief requests.
  
  
• Offer in Compromise: Employers who cannot pay their balance may request an Offer in Compromise to settle for less than owed. Eligibility requires proving that paying the full balance would create economic hardship or is otherwise not collectible. The IRS evaluates income, assets, and expenses before accepting an offer. Applications include forms, fees, and timelines that may take six to twelve months for review.
  
  
• Currently Not Collectible Status: CNC status protects employers when the IRS determines they cannot pay anything toward their tax debt. The IRS pauses active collection, but penalties and interest continue accruing on the unpaid balance. Employers must provide proof of financial hardship through records, income statements, and allowable expense reports. The IRS reviews CNC accounts periodically, which is not a permanent resolution.

Exploring these resolution programs with professional guidance helps employers reduce penalties, manage payment obligations, and avoid aggressive IRS collection actions.

FAQs

Can I still file my 2018 Form 940 even though it’s years late?

Yes, you can still file your 2018 Form 940 even though it is years late. The IRS does not limit how long you must file delinquent tax returns. Filing now helps stop additional failure-to-file penalties from accumulating and allows you to address outstanding payroll tax obligations. Even if you cannot pay immediately, filing reduces overall exposure and positions you for penalty relief or payment arrangement programs.

Do I need separate forms for each unfiled year?

Yes, you must use a separate Form 940 for each unfiled year because the IRS does not accept combined filings. Each form is specific to that year’s federal unemployment tax rates, due date, and instructions. For example, an unfiled 2018 Form 940 must be submitted on the 2018 version of the tax form. Filing each prior year correctly ensures the IRS processes your tax returns without errors or unnecessary delays.

What if I don’t have my 2018 payroll records?

If you no longer have your 2018 payroll records, you should reconstruct them using alternative documentation. Sources may include bank statements, W-2s, Forms 941, or state unemployment tax reports. The IRS expects employers to make a good-faith effort to accurately report wages, deposits, and deductions. A tax attorney or CPA can help gather and organize available records. Accurate reconstruction reduces the risk of IRS notices, penalties, and incorrect assessments.

How much will penalties and interest add to my liability?

Penalties and interest vary depending on how long your 2018 Form 940 remains unfiled and unpaid. The failure-to-file penalty accrues five percent per partial month, capped at 25 percent of the unpaid tax. A failure-to-pay penalty adds 0.5 percent monthly, also capped at 25 percent. Daily compounded interest applies to both tax and penalties. After several years, these costs can exceed the original liability, making timely action essential to limit further growth.

Can penalties be removed if I don’t qualify for First Time Abate?

Yes, penalties may still be reduced or removed under reasonable cause relief, even if First Time Abate does not apply. The IRS grants relief when taxpayers demonstrate circumstances beyond their control that prevented timely filing or payment. Examples include serious illness, natural disasters, or the inability to obtain necessary records. Documentation is critical for approval. A tax professional or attorney can prepare detailed explanations and evidence, increasing the likelihood of a successful penalty reduction.