The Failure to Deposit Penalty is a penalty imposed by the IRS on employers who fail to make Federal Tax Deposits (FTDs) for payroll taxes on time. Employers are required to deposit federal income tax withholdings, Social Security, and Medicare taxes regularly based on their payroll schedule, and failure to meet these requirements can result in penalties.
The penalty amount varies depending on how late the deposit is:
- 1-5 days late: 2% of the unpaid deposit.
- 6-15 days late: 5% of the unpaid deposit.
- More than 15 days late: 10% of the unpaid deposit.
- More than 10 days after receiving an IRS notice: 15% of the unpaid deposit.
Employers who miss a deposit deadline should make the payment as soon as possible to minimize the penalty. In some cases, the IRS may waive the penalty if the employer can demonstrate reasonable cause for the late deposit. Ensuring timely FTDs helps employers avoid costly penalties and stay compliant with federal payroll tax requirements.