What is the penalty for late deposit of payroll taxes?

The penalty for the late deposit of payroll taxes is established as 5% of the unpaid tax amount. This penalty is imposed to encourage timely compliance with tax obligations. It’s important to understand that this percentage applies specifically to the amount of tax that is not deposited by the due date.

The Department of the Treasury imposes this 5% penalty on the unpaid amount for each month or part of a month that the payment is late, up to a maximum of 25%. This means that if employers consistently fail to make timely deposits, the penalties can accumulate significantly, increasing the overall liability.

Understanding the structure of these penalties is crucial for payroll professionals, as it helps to ensure that companies are compliant with tax regulations and avoid additional financial burdens due to late payments.