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IRS 2 day late deposit penalties?

MKDMKD
edited September 2010 in General Payroll Topics
Has anyone else been receiving incorrect deposit penalties from IRS? We file electronically, so I don't know what's going on. Our schedule B's are correct, and going by the semi-weekly deposit schedule, we deposited when we're supposed to, but they say we should have deposited two days earlier. Very frustrating to have to deal with this every quarter.

Comments

  • jadegurljadegurl ✭✭✭
    We have gotton a couple also. We also file electronically and pay semi weekly.

    The problem is the last deposit of the quarter, you have to submit the deposit by the end of the month/quarter rather than your normal semi weekly schedule. This may mean that you have to make 2 deposits if some of your liability is for the quarter that just closed and some for the new quarter.

    Once we started doing that the notices stopped.
  • I don't understand what you mean by having to pay by the end of the quarter. If you're on a semi-weekly deposit schedule, doesn't this hold for all deposits (except those over $100K)? And the notices we're getting are applying to payments throughout the quarter, not just at the end.
  • jadegurljadegurl ✭✭✭
    It holds for all deposits except for the last one of the quarter...(Your 941 is filed quarterly as is schedule B) That last deposit must be sent on the last day of the month or they will hit you for a penalty and say it was late Even if it is not over 100k.
    Our last deposit of the quarter is never over 70k but as long as we send it by the last day of the month they leave us alone.

    We submit our deposits every Tuesday.

    Here is an excerpt from Pub 15:

    Semiweekly Deposit Schedule

    You are a semiweekly schedule depositor for a calendar year if the total taxes on line 8 of Form 941 during your lookback period were more than $50,000. Under the semiweekly deposit schedule, deposit employment taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Deposit taxes for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. See also Deposits on Banking Days Only later.

    Note.
    Semiweekly schedule depositors must complete Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors, and submit it with Form 941. If you file Form 944 and are a semiweekly schedule depositor, complete Form 945-A, Annual Record of Federal Tax Liability, and submit it with your return (instead of Schedule B).
    Table 2. Semiweekly Deposit Schedule
    IF the payday falls
    on a . . . THEN deposit taxes by
    the following . . .
    Wednesday, Thursday,
    and/or Friday Wednesday
    Saturday, Sunday,
    Monday, and/or Tuesday Friday
    Semiweekly deposit period spanning 2 quarters. If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities.
    Example 1. If you have a pay date on Wednesday, September 29, 2010 (third quarter), and another pay date on Friday, October 1, 2010 (fourth quarter), two separate deposits would be required even though the pay dates fall within the same semiweekly period. Both deposits would be due Wednesday, October 6, 2010 (3 banking days from the end of the semiweekly deposit period).
    Example 2. If you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 on the following Wednesday. If you made no additional payments on Saturday through Tuesday, no deposit is due on the following Friday.
    Summary of Steps to Determine
    Your Deposit Schedule
    1. Identify your lookback period (see Lookback period earlier).
    2. Add the total taxes from line 8, Form 941 you reported during the lookback period.
    3. Determine if you are a monthly or semiweekly schedule depositor:
    If the total taxes you reported in the lookback period were Then you are a
    $50,000 or less Monthly Schedule Depositor
    More than $50,000 Semiweekly Schedule Depositor
  • Can you give me the IRS cite regarding that last deposit needing to be made the last day of the quarter? I looked at Publication 15 but can't find it.
  • jadegurljadegurl ✭✭✭
    I just posted the excerpt from Pub 15 but here is the link:

    http://www.irs.gov/publications/p15/ar0 ... 1000202435

    look at the section for semi weekly depositors.
  • Just guessing -
    Per Pub 15 - an EFTPS deposit must be initiated at least one day before the day it is due. If the transaction is initiated after the bank's cut off time for the day, and it takes one day to go through the system, I can see the possibility of two days - for example, transactions don't hit my personal bank account until after Midnight. Anyway, I see lots of potential for explaining the two days here. It may be the way the bank processes the transactions. It could also be that there are a lot of new people at the IRS, a glitch in the IRS computer system, or the way things are reported on the Sch B, but that does not make a whole lot of sense given the discussion here.

    There is nothing I've found in the instructions to indicate that a pay period at the end of the quarter is any different than all the others. If that is not true, then you have reasonable cause for getting the penalty waived (reliance on written instructions from the IRS) - however, you must separate deposits for different pay periods even if due the same day. The following is from Pub 15 - page 21
    Semiweekly deposit period spanning 2 quarters. If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities.

    Example 1. If you have a pay date on Wednesday, September 29, 2010 (third quarter), and another pay date on Friday, October 1, 2010 (fourth quarter), two separate deposits would be required even though the pay dates fall within the same semiweekly period. Both deposits would be due Wednesday, October 6, 2010 (3 banking days from the end of the semiweekly deposit period).

    Example 2. If you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 on the following Wednesday. If you made no additional payments on Saturday through Tuesday, no deposit is due on the following Friday.
  • I guess I'm reading it differently than you. On that page under semi-weekly deposit schedule, they give an example that includes the statement that if your have a pay date on Wednesday, September 29, 2010 ... your deposit would be due Wednesday, October 6, 2010 (3 banking days from the end of the semiweekly deposit period).

    I just wrote a letter requesting removal of penalties for payments that the IRS said were made two days later than their own EFTPS system shows. There's got to be a glitch on their end somewhere.
  • My impression is - without knowing what I am talking about, if EFTPS is used, a next banking day deposit would have to be made on payday before the bank's cut off - otherwise it would be the day after the next banking day and one day late.

    My thinking was that a deposit made after the bank cut off date on the day due (say Wednesday) would be treated by the bank as Thursday business and processed after midnight Thursday night (Friday morning).

    I also notice that both jadegurl and MKD are in the central time zone - hmmmm.

    There is a way to make direct e-payments to the IRS on the due date and have them counted as timely described in Circular E.

    But I would check with the IRS and see just what it is that is going on - Perhaps the Fed is using the float :roll:
  • Thanks for all your replies. The tax amounts we're dealing with these on are not over 100K for the semiweekly period, so that is not the issue. Their system is misidentifying the day that the deposit should be made. For example, a Wednesday pay date has to have taxes deposited by the following Wednesday, which we do, but their letter says it should have been on Friday. Our schedule B's are correct. I'll just have to keep dealing with them, because I can't see what the issue is. In all cases, we have had all the penalties reversed, so I'm sure it's some error on IRS's end.
  • Their system is misidentifying the day that the deposit should be made. For example, a Wednesday pay date has to have taxes deposited by the following Wednesday, which we do, but their letter says it should have been on Friday.

    Oh - of course - it is because this year is NOT a leap year :lol:
  • MKD wrote:
    In all cases, we have had all the penalties reversed, so I'm sure it's some error on IRS's end.


    If I had $1 for every letter the IRS sent in error or where they made a mistake...haha
  • I just got this notice from Ceridian saying the IRS has indicated they sent out erroneous letters.
    http://www.ceridian.com/www/content/3/1 ... _error.pdf
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