Publication 5258 - Federal Tax Deposits (Page 21 of 32) in pdf

Publication 5258 - Federal Tax Deposits Page 21

federal tax deposit

penalties

c hapterFive

s you previously learned, it is important to make timely federal tax depos-

its because most of the money belongs to your employees. If you make these

deposits late, you will receive a penalty. This penalty is called a “failure to depos-

it” penalty and is computed by multiplying the amount of tax you have under-

paid by a penalty percentage rate based on how many days late you make the

deposit.

Failure to Deposit Penalty Percentage rates

at a Glance

ercenTaGe

aTe

enalTy on

failure to deposit penalty

$3,000

UmBer oF

ays

aTe

nderpaymenT

rates for unpaid tax:

1–5

$60

1-5 days late: 2%

6–15

$150

16 +

10%

$300

6-15 days late: 5%

More than 10 days after first IRS bill

15%

$450

16 or more days late: 10%

More than 10 days after

In addition to the above deposit penalties, you will also be subject to penalties if

the first IRS bill: 15%

you file your Forms 940, 941, or 944 late, or don’t pay the amount due on the return:

other Penalties

aTe

axImUm

Failure To File Penalty

5% per month of unpaid tax on

25%

the due date, reduced by the

amount of failure to pay penalty

for the same month

1/2 % per month of

Failure To Pay Penalty

unpaid tax, then 1% per month

25%

after Notice of Intent to levy

reminder: In addition to penalties, you also must pay interest. Interest rates are set

quarterly. For example, the interest rate has recently varied between 3–6%. You

will continue to pay interest until you pay all the money you owe the government.

A ten per cent avoidance penalty is assessed if you do not deposit as required.

The penalty is charged if you send a payment to the IRS when you are required to

deposit. The avoidance penalty is assessed at the same time as the failure to depos-

it penalty, not in addition to the failure to deposit penalty.

Publication 5258 - Federal Tax Deposits Page 21

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