Federal Payroll Penalties

Federal Payroll Penalties

A helpful break down of most federal payroll penalties that employers need to be aware of.

EFTPS Deposit Penalties (Including Form 940 Deposits)

  • 2% on deposits made 1 to 5 days late
  • 5% on deposits made 6 to 15 days late
  • 10% on deposits made 16 or more days late, but on or before the 10th day after the date of first notice
  • 10% on the amount paid directly to the IRS or paid with the tax return that should have been deposited
  • 15% on deposits still unpaid more than 10 days after the first notice or the day on which you receive notice and demand for immediate payment, whichever is earlier

Form 941 or 944 Penalties

  • Failure-to-File: 5% of unpaid tax due with the return for each month or part of a month your return is late, not to exceed 25%
  • Failure-to-Pay: 0.5% of the amount of tax per month or part of a month your payment it late, not to exceed 25%
  • If you experience both penalties, your failure-to-file penalty is reduced by your failure-to-pay penalty
  • Also, interest accrues from the due date of the unpaid balance
  • The penalties will not be charged if you can show reasonable cause

Dishonored Check or Other Form of Payment

  • 2% of the payment amount for payments over $1250
  • Lessor of $25 or the amount of the payment, for payments under $1250

Form W-2

  • $30 per Form W-2 if filed within 30 days of being late
  • $60 per Form W-2 if filed after 30 days of being late, but before August 1st
  • $100 per Form W-2 if filed after August 1st