Publication 5258 - Federal Tax Deposits Page 22
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32The ABCs of Federal Tax Deposits
As a business person, you regularly have to make decisions regarding the financ-
ing of your business, especially during periods when you face a cash flow prob-
lem. You may rely on your banker for this financing. However, you may also con-
sider using unpaid tax deposits. To do this, you wouldn’t deposit trust fund taxes
withheld from your employees. This means you would get penalties. Let’s assume
you need $10,000 for a year and compare three different ways of obtaining the
needed money.
o
a:
Bank financing at 10%
ption
$ 10,000 + $ 1,000 Interest = $ 11,000
o
B:
Use a credit card at 18%
ption
$ 10,000 + $ 1,800 Interest = $ 11,800
o
c:
Use the Trust Fund Taxes
ption
$ 10,000
+ $ 1,500 Deposit Penalty 15%
+ $ 1,200 Failure to Pay Penalty 1% per month
+ $ 500 Interest
= $ 13,200
Not only is it wrong to use trust fund monies to finance your operations, it
can also be the most expensive alternative.
practical exercise 4
Please indicate whether each statement is true or false.
T F
1 Employer has $2,400 in tax liability for the quarter. As long as
deposits are made by the return due date, there is no deposit
penalty.
2 The penalty for late deposits varies depending on how late the
deposit is made—the amount increases the later the deposit is
made.
3 The penalty for late deposits is 10% of the amount of the undepos-
ited tax, no matter when it is paid.
4 There are additional penalties on taxes that are not paid or
returns not filed by the due date of the return.
5 Employer has $2,000 in tax liability for the second quarter.
Employer has $52,000 liability for the third quarter. There may
be a deposit penalty if a payment is sent with a timely filed third
quarter tax return.
22
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial