Federal Tax Deposits

Late deposit penalties for federal tax deposits.

Deposit Penalties: Penalties may apply if you do not make required deposits on time, if you make deposits for less than the required amount, or if you do not use EFTPS when required. The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. For amounts not properly or timely deposited, the penalty rates are as follows.

2% –        Deposits made 1 to 5 days late. 

5% –        Deposits made 6 to 15 days late.

10% –     Deposits made 16 or more days late. Also applies to amounts paid within 10 days of the date of the first notice the IRS sent asking for the tax due.

10% –     Deposits made at an unauthorized financial institution, paid directly to the IRS, or paid with your tax return. But see Depositing without an EIN and Payment with return shown below for exceptions.

10% –     Amounts subject to electronic deposit requirements but not deposited using EFTPS.

15% –     Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier.

Note: Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability.

Exceptions to the 10% Penalty:

Payment with return. You may make a payment with Form 941 instead of depositing if one of the following applies.

* You report less than a $2,500 tax liability for the quarter on line 10 of Form 941, and you pay in full with a timely filed return. (However, if you are unsure that you will report less than $2,500, deposit under the appropriate rules so that you will not be subject to failure-to-deposit penalties.)

* You are a monthly schedule depositor (defined below) and make a payment in accordance with the Accuracy of Deposits Rule. This payment may be $2,500 or more.

Depositing without an EIN.   If you have applied for an EIN but have not received it and you must make a deposit, make the deposit with the IRS. Do not make the deposit at an authorized depositary. Make it payable to the “United States Treasury” and show on it your name (as shown on Form SS-4), address, kind of tax, period covered, and date you applied for an EIN. Send your deposit with an explanation to your local IRS office or the service center where you will file Form 941. The service center addresses are in the Instructions for Form 941 and are also available on the IRS website at www.irs.gov. Do not use Form 8109-B, Federal Tax Deposit Coupon, in this situation.

Order in which deposits are applied.   Deposits generally are applied to the most recent tax liability within the quarter. If you receive a failure-to-deposit penalty notice, you may designate how your payment is to be applied in order to minimize the amount of the penalty. Follow the instructions on the penalty notice that you received. For more information on designating deposits, see Rev. Proc. 2001-58. You can find Rev. Proc. 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www.irs.gov/pub/irs-irbs/irb01-50.pdf.

StaffScapes, a Professional Employer Organization (PEO), takes over the responsibility and liability of tax deposit and reporting for our clients.  Please call (303)466-7864 and ask a StaffScapes’ representative how we can reduce your tax administration liability.