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What Happens When You Don’t File a Payroll Return?

Written by Jacob Merkley on September 16, 2020

What Happens when you don't file a payroll return?

After ensuring that your employees get paid, the next step is to make sure you make a timely federal tax deposit. You do that based on a semi-weekly or monthly tax deposit. Do you know which schedule you are supposed to be on?

After the deposit, the only other thing that needs to be done is filing a payroll return. But what happens if you don’t file that return?

When to File

Filing Form 941 is done on a quarterly bases, by the last day of the month that follows that specific quarter. If your construction business runs on a calendar year, then these are your due dates:

  • Quarter 1 (January – March) = April 30 due date
  • Quarter 2 (April – June) = July 31 due date
  • Quarter 3 (July – September) = October 31 due date
  • Quarter 4 (October – December) = January 31 due date

Penalties for Late Filing

If you don’t file a payroll return, it will signal to the IRS that you should be looked at. If you have already deposited your trust fund taxes (the portion of tax that you withheld from your employees) to the IRS, but you did not file a return, then you will get slapped with the Failure to File Penalty.

Did you know that you can also be held personally liable for the Trust Fund Recovery Penalty if you fail to deposit payroll taxes to the IRS?

For each month, or partial month, you are late filing Form 941, the IRS imposes a 5% penalty with a maximum penalty of 25%. The penalty amount is based on the total unpaid tax due with the return.

The Bigger Issue

While one penalty might not seem like a big deal at first, the bigger issue is that your account at the IRS will get flagged. This could cause issues later on down the road. The IRS will now be able to start looking at you a bit closer.

Don’t allow yourself to get to this point.

Filing the 941 tax return is simple, and most are able to do it (or pay someone to complete it) on time.

In my experience, once a taxpayer business doesn’t file a 941, it usually hints at other issues. And in most of those cases, payroll tax debt is right around the corner.

For those that miss a 941 payment, are you having other issues as well? If so, the IRS collection avalanche is upon you.

Brace yourself for what comes next.


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