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Form 940 Penalties for Late Filing and Payment
Understand Form 940 late filing and payment penalties, how the IRS calculates charges,
and the options available to avoid or reduce them.
By Charles Hardy | Last Updated: November 11, 2026
Key Takeaways
- Filing Penalty: 5% of unpaid taxes for each month late, up to 25%.
- Payment Penalty: Ranges from 2% to 15% based on how late the payment is.
- Interest: Accumulates on outstanding FUTA taxes until paid in full.
- Deposit Requirement: Quarterly deposits are mandatory when annual FUTA liability exceeds $500.
- Compliance: Timely filing, payment, and deposits help employers avoid IRS penalties and interest.
What is the penalty for late filing of Form 940?
You will be subject to IRS penalties if your Form 940 is not filed on the correct due date. This penalty may increase depending on the number of days your return is late.
- Your penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty will increase to a maximum of 25% of your unpaid taxes.
- If your return is more than 60 days late, additional penalties will be charged.
Estimate your Form 940 penalty
Form 940 late filing penalty depends on how late the return is and the tax still owed. Enter your details to get a clear estimate of
the penalties.
What is the penalty for late payment of Form 940 Taxes?
If you don't pay your FUTA tax by the due date, the IRS may charge a Failure to Pay (FTP) penalty.
The penalty is generally 0.5% of the unpaid tax for each month or part of a month the payment remains outstanding, up to a maximum of 25%.
If both late-filing and late-payment penalties apply, the IRS reduces the late-filing penalty by the late-payment penalty charged for the
same month.
What is the penalty for late deposit of 940 taxes?
You may be charged with penalties if you do not make required FUTA tax deposits on time or make deposits for less than the actual amount.
The table below has the penalty rates for amounts not properly or timely deposited:
| Penalty | Charged For |
|---|---|
| 2% | 1 to 5 calendar days late |
| 5% | 6 to 15 calendar days late |
| 10% | Deposits made 16+ days late but 10 days before the date of the first IRS notice |
| 15% | Deposits still unpaid more than 10 days after the date of the first IRS notice |
Tips to Avoid 940 Penalties
You can avoid IRS penalties by following the correct way to make payments to the IRS. To avoid hefty penalties from the IRS, follow the
tips below:
- Deposit & pay the taxes on time when they are due.
- File Form 940 before the due date.
- Attach Form 940 Schedule R if required.
- Attach Form 940 Schedule A if required.
To ensure timely filing before the due date, the IRS recommends e-filing Form 940.
Make Timely Deposits and E-File 940 with TaxBandits to
Avoid Penalties!
TaxBandits will notify you of crucial IRS deadlines via email or phone, helping you stay compliant and avoid late filing penalties. TaxBandits also simplifies your tax payments with the EFTPS payment solution. When you e-file 940 with TaxBandits, your return is checked for errors using IRS Business Rules, ensuring accurate filing.
Click here to learn how to pay your taxes and e-file Form 940 with TaxBandits.
Article Sources:
- Internal Revenue Service. "Failure to file penalty"
- Internal Revenue Service. "Failure to Pay Penalty"
- Internal Revenue Service. "Information About Your Notice, Penalty and Interest"
Ready to Stay Ahead of Form 940 Penalties?
Understand IRS penalties for late filing, payment, and FUTA tax deposits.
Learn how to avoid costly fines and file Form 940 accurately with TaxBandits.
