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IRS Penalty for Timeliness?

Does the IRS penalize people for paying their payroll taxes ON TIME? It's hard to believe it, but yes they do. Don't let this happen to you!

If you are a business of any size, you probably have to make your payroll tax deposits electronically using the EFTPS system. For those who are not aware, you have to set up the payment the day BEFORE the payment is due. But what happens if you forget to set up your payment the day before? This happened to a business I know. They realized they were going to be late and incur a 2% penalty so they tried to do the right thing by taking their deposit to the bank and depositing it there. Surprise! IRS hit them with a 10% penalty for failure to deposit electronically. So even though the tax was paid on time, they got 5 times the penalty for trying to be good corporate citizens and to do what was right.

We did appeal the penalty with IRS and ultimately got it cancelled, but watch out for this trap or it may cost you a lot of money or aggravation.

-Mark E. Edgar CPA