The IRS failure-to-deposit penalty starts at 2% on day one and climbs to 15% if you ignore the bill. Below is the full schedule, a dollar-cost example, and the two ways to ask for relief.
The penalty is set by Internal Revenue Code Section 6656. It runs on calendar days, not business days, and applies to the unpaid portion of the deposit. The percentage compounds the longer you wait.
| How late | Penalty | Cost on a $10,000 deposit |
|---|---|---|
| 1 to 5 calendar days | 2% | $200 |
| 6 to 15 calendar days | 5% | $500 |
| 16 or more calendar days | 10% | $1,000 |
| 10+ days after IRS notice | 15% | $1,500 |
Interest also accrues from the original due date until the deposit is paid. The interest rate is set quarterly by the IRS and adjusts with the federal short-term rate.
The penalty applies per deposit, not per year. Each missed deadline is a separate assessment.
total penalty on six monthly deposits of $10,000 each, all 1–5 days late (2% × 6)
Calculated under IRC §6656
total penalty on the same six deposits if each lands 16+ days late (10% × 6)
Calculated under IRC §6656
Trust Fund Recovery Penalty exposure on unpaid trust-fund taxes — assessed personally
IRC §6672
Assume you owe a $25,000 federal payroll tax deposit on the 15th. You realize on the 22nd that the EFTPS payment was never submitted. The deposit lands seven calendar days late.
If the same deposit landed two days later, on day 16, the penalty doubles to 10% — $2,500 on the same $25,000. That is the cost of a calendar oversight: roughly $1,250 between day 7 and day 16. A reminder that fires on the deposit due date eliminates that window.
Failure to deposit and failure to file are two different penalties. They stack. The Failure to File penalty under IRC §6651 is 5% of the unpaid tax per month or part of a month, capped at 25%. If you miss both the deposit deadline and the quarterly Form 941 filing deadline, both clocks run at the same time.
For a worked example of how the two penalties interact on a single quarter, see the IRS Failure to File Penalty page. The short version: do not let the quarterly form slide just because the deposit was made.
The trust-fund portion of payroll taxes is the money withheld from employees — federal income tax, Social Security, Medicare. The IRS treats it as money held in trust for the government. If that trust money is never deposited, the IRS can assess up to 100% of it personally against anyone found responsible.
Responsibility extends beyond the owner. Officers, directors, partners, and any individual with check-signing authority or control over which bills get paid can be assessed under IRC §6672. Bankruptcy does not discharge the Trust Fund Recovery Penalty.
This is the tail end of a long pattern of missed deposits, not a first-offense outcome. But the path starts with a single missed deadline.
Two paths are available, and both require you to ask.
Available if you have filed all required returns and have a clean compliance record for the three tax years preceding the penalty year. One-time use. Request it by calling the IRS or filing Form 843. Approval is usually within a single phone call.
Available regardless of compliance history when you can document a circumstance outside your control: serious illness, natural disaster, inability to obtain records, reliance on a tax professional in specific circumstances. Requires written justification with supporting documentation.
Neither path is automatic. Both leave a paper trail. The better outcome is to never need either one.
A 2% penalty on a $10,000 deposit costs $200. A payroll tax deposit reminder costs nothing. The reminder sends advance notice, lands again on the due date, and follows up until you confirm the deposit is made.
See also: the full schedule of federal payroll tax deposit due dates and how to know which deposit schedule applies to your business.
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A deposit between 6 and 15 calendar days late triggers a 5% penalty on the unpaid amount. A $10,000 deposit submitted 7 days late costs $500 in failure-to-deposit penalty, plus interest accruing from the original due date until paid.
It depends on how late. The IRS failure-to-deposit penalty under IRC §6656 runs 2% for 1–5 days late, 5% for 6–15 days, 10% for 16 or more days, and 15% once you are 10 or more days past an IRS notice demanding payment.
The penalty applies to the unpaid portion of the deposit and is calculated based on how many calendar days late it is, not business days. Even one day late triggers the 2% tier. Interest also accrues from the original due date.
Yes, in two main ways. First-Time Penalty Abatement removes the penalty if you have a clean compliance record for the prior three years and current filings are up to date. Reasonable Cause relief is also available if you can document a circumstance outside your control. Both require contacting the IRS directly.
Yes. The Failure to File penalty is 5% of the unpaid tax per month or part of a month, up to 25%. This is separate from the failure-to-deposit penalty and can stack on top of it. The deposit and the form are two distinct compliance obligations with two distinct penalties.
Yes. The Trust Fund Recovery Penalty under IRC §6672 lets the IRS assess up to 100% of the unpaid trust-fund portion against any individual found responsible for the failure to remit. Owners, officers, and even bookkeepers with check-signing authority can be held personally liable, separate from the business itself.
Criminal prosecution is rare and applies to willful failure to collect or pay over trust-fund taxes under IRC §7202. Most penalty assessments are civil. Criminal cases generally involve employers who collected the withholding but used it for business cash flow rather than depositing with the IRS.
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