Failure to Deposit Penalty


IRS Definition

The Internal Revenue Code provides for the Failure to Deposit (FTD) penalty if a taxpayer does not deposit tax in the correct amount, within the prescribed time period, and/or in the required manner.

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The IRS sends each business with employees a letter explaining its federal tax deposit schedule, so the business knows how frequently it is required to make its federal tax deposits. This letter also explains that all deposits must be made electronically. If the business fails to make its deposits as scheduled, in the correct amount or in the manner required, the IRS will charge a federal tax deposit penalty.

The penalty rates are: 2% for 1-5 days late; 5% for 6-15 days late; 10% for deposits made more than 15 days late.

Failure to make the deposit electronically is 10% and the penalty is 15% if the amount remains unpaid more than 10 days after the first notice requesting payment.

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