Payroll Tax Delinquency Penalty

You are required to pay penalties for undeposited or unpaid employment taxes, and for late payroll tax returns. The IRS will calculate separate penalty for each type of delinquency, and then add up the penalty for each and combine them to determine the total amount.

Liability and negligence penalty for taxes not withheld at all.

The penalty applies when employers fail to withhold taxes at all. This sometimes happens if employees have terminated or have insufficient current wages on which to pay the taxes due to various year-end adjustment items. The employers (and responsible persons including officers and director) are 100% liable for the taxes they fail to withhold federal income and FICA taxes from employees’ wages.

Failure to pay payroll taxes

If you fail to pay employment taxes, you will be penalized. Your penalty is based on the number of days the deposit is late. The penalty schedule is as follows:

Days late Penalty
1 to 5 days 2%
6 to 15 days 5%
16 or more days
Also applies to deposits made within 10 days of the date of the first IRS notice requesting the tax.
Amounts unpaid more than 10 days after the date of the first IRS notice requesting the tax, or the day when you received notice and demand for immediate payment, whichever is earlier. 15%

Late Filing Penalty

The due date for your return is different than your tax deposit date. Form 941 is due on the last day of the month that follows the close of the quarter, regardless of how often you make deposits. Count the number of whole or partial months since your employment tax return was originally due. Locate the unpaid tax you owe on the return. This is shown on line 14 of Form 941. Multiply the unpaid tax amount by 5 percent for any whole or partial month your return is late. Because this penalty is assessed based on any unpaid balance you owe, you will not accrue a late filing penalty if you don’t have a balance – even if you file late.