How the deposit penalty works
When payroll taxes aren't deposited on time, the IRS charges a failure-to-deposit penalty (IRC 6656). It's a percentage of the late amount, and the rate depends on how late it was:
- 2% if deposited 1 to 5 calendar days late
- 5% if 6 to 15 days late
- 10% if 16 or more days late
The rates don't add together. A deposit made 20 days late owes 10%, not 2% plus 5% plus 10%. Say a $12,000 deposit goes in 8 days late. That's 5%, or $600. At 16 or more days late, it would be 10%, or $1,200.
After an IRS notice
If the IRS sends a notice asking for the tax, the rate can climb:
- 10% if you pay within 10 days after the date of the first notice.
- 15% if it's still unpaid more than 10 days after the date of that notice, or on the day the IRS demands immediate payment.
Got a notice? Check the box for it in the calculator and enter its date. Not sure what it means? Look it up in the IRS notice lookup.
Counting the days
Days late are counted in calendar days from the due date. Your deposit schedule sets the due date. Monthly depositors deposit by the 15th of the following month. Semiweekly depositors have Wednesday and Friday deadlines.
If a due date lands on a weekend or legal holiday, a deposit made the next business day is on time. The calculator handles that for you: enter the date the deposit was due, and it counts from the next business day. Planning a deposit for a future date? It shows the last day to make it before the rate goes up.
Getting the penalty removed
First-time relief covers the late-deposit penalty. The test looks back 12 quarters for Form 941 and other quarterly returns, or three years for annual returns. The business needs the same return filed on time for that whole period, with no penalties apart from any the IRS removed for reasonable cause or its own error. Relief doesn't apply if the IRS has waived a deposit penalty for the business four or more times in the past three years. It also doesn't apply to a penalty for avoiding EFTPS, the IRS's electronic payment system.
Starting with 2026 quarterly returns, the IRS applies this relief automatically, under Automatic Exemption from Penalty. For 2025 and earlier quarters, you ask for First Time Abate. You can also ask if a notice for a 2026 quarter shows the penalty anyway, which the IRS says may happen during the changeover. The penalty removal letter builder writes the request. Pick Form 941 and a late-deposit line appears.
Interest on late tax is charged separately, and this calculator shows the penalty only. Behind on other filings too? The late W-2 and 1099 calculator and the S corp and partnership calculator cover other business penalties.
Questions people ask
What is the penalty for a late payroll tax deposit?
It's 2% of the late amount if it's 1 to 5 calendar days late, 5% if 6 to 15 days late, and 10% if 16 or more days late. It goes to 15% if the tax is still unpaid more than 10 days after the date of the IRS's first notice.
Do weekends count as days late?
Yes. Days are counted in calendar days. But if the due date itself falls on a weekend or legal holiday, a deposit made the next business day is on time.
Does the penalty include interest?
No. Interest on late tax is charged separately. This calculator shows the penalty only.
Can first-time abatement remove a deposit penalty?
Yes, if the business qualifies. It doesn't apply if the IRS has waived a deposit penalty for the business four or more times in the past three years, or if the penalty was for avoiding EFTPS.