Failure to Deposit Penalty

 

The Failure to Deposit Penalty applies to employers that don’t make employment tax deposits:

  • On time
  • In the right amount
  • In the right way

Employer-paid taxes include federal income tax, Social Security and Medicare taxes and Federal Unemployment Tax. Employers must send employment tax deposits to the IRS on a monthly or semi-weekly schedule.

The penalty you pay is a percentage of the taxes you did not deposit on time, in the right amount or in the right way.

How You Know You Owe the Penalty

We send you a notice or letter if you owe the Failure to Deposit Penalty. For more information, see Understanding Your IRS Notice or Letter.

How We Calculate the Penalty

We calculate the amount of the Failure to Deposit Penalty based on the number of calendar days your deposit is late, starting from its due date.

The penalty amounts don’t add up. For example, if your deposit is more than 15 calendar days late, we don’t add a 10% penalty to the earlier 2% and 5% late penalties. Instead, in this example, your new total penalty would be 10%.

Number of Days Your Deposit is Late Amount of the Penalty
1-5 calendar days 2% of your unpaid deposit
6-15 calendar days 5% of your unpaid deposit
More than 15 calendar days 10% of the unpaid deposit
More than 10 calendar days after the date of your first notice or letter (for example, CP220 Notice) or The day you get a notice or letter for immediate payment (for example, CP504J Notice) 15% of your unpaid deposit

Interest on a Penalty

We charge interest on penalties.

The date from which we begin to charge interest varies by the type of penalty. Interest increases the amount you owe until you pay your balance in full. For more information about the interest we charge on penalties, see Interest on Underpayments and Overpayments.

Pay a Penalty

Send us a payment or pay your taxes in full to stop future penalties and interest from adding up.

Remove or Reduce a Penalty

We may be able to remove or reduce some penalties if you acted in good faith and can show reasonable cause for why you weren’t able to meet your tax obligations. By law we cannot remove or reduce interest unless the penalty is removed or reduced.

For more information, see penalty relief.

Remove a Penalty Without a Bank Account

If you already filed your tax return and you don’t have a bank account, you may send us a request asking us to remove a penalty. To send us a request:

  1. Get a signed and dated statement from the bank that declined your account. The statement must be less than 2 years old.
  2. Write a letter asking us to remove the penalty. In your letter, write a description of what you did to try to get a bank account.
  3. Attach a copy of the notice we sent you.
  4. Send your request to the address on the notice we sent you.

Dispute a Penalty

If you disagree with the amount you owe, you may dispute the penalty.

Call us at the toll-free number at the top right corner of your notice or letter or write us a letter stating why we should reconsider the penalty. Sign and send the letter along with any supporting documents to the address on your notice or letter.

Have this information when you call or send your letter:

  • The notice or letter we sent you
  • The penalty you want us to reconsider
  • For each penalty, an explanation of why you think we should remove it

If you didn’t receive a notice or letter, get telephone assistance.

Avoid a Penalty

Review information about schedules, due dates and forms to file for depositing and reporting employment tax.

Avoid a Penalty Without a Bank Account

If you haven’t filed your tax return yet and don’t have a bank account, you may send us a request asking us to not apply a penalty to you. To send us a request:

  1. Get a signed and dated statement from the bank that declined your account. The statement must be less than 2 years old.
  2. Write the word “Unbanked” at the top of the employment tax return (Forms 941, 943, 944 or 945).
  3. Write a letter asking us to not apply the penalty. In your letter, write a description of what you did to try to get a bank account.
  4. Attach the signed and dated statement from the bank and your request letter to your employment tax return.
  5. Mail your request to the address in the form instructions.

Apply for a Payment Plan

If you can't pay the full amount of your taxes on time, pay what you can now and apply for a payment plan. You may reduce future penalties when you set up a payment plan.

Get Help

For help with a penalty, call the phone number on your notice or letter. If you didn’t receive a letter or notice, use telephone assistance.

Law and Regulations