You may have filed late, or made a late payment on your quarterly tax returns. If you’re worried about facing a Form 941 late payment penalty, or form 941 late filing penalty then this article is for you! We’ll go through:
- Why you might be penalized
- How much you’re likely to be penalized
- How you can rectify your Form 941 late filing or late payment penalty; and
- How to avoid From 941 penalties in the future.
Why you might be penalized
If you’re an employer, then you know that you must file your quarterly tax returns with the IRS. This is usually done through IRS Form 941, and usually relates to payroll taxes for your employees’ wages.
However, the IRS levies a penalty against you if you do one or more of the following:
- Failure-to-file, and
How much you’re likely to be penalized
Form 941 Late Filing Penalty
You must file Form 941 by the end of the month following that particular quarter. For example, if you’re filing for the quarter ending Jun 30th, then you must file before July 31st. Fail to do that and you’ll be looking at a Form 941 Late Filing Penalty.
Here’s how much penalty you’re likely to incur:
- 5% for every month or part thereof that you file late.
- Up to a maximum of 25%
Even if you had no tax due, you’re still liable for a penalty if you have filed late.
Form 941 Late Payment Penalty
Deposits are a little complicated, so we’ve summarized that in this neat little table:
|Amt. of tax liability incurred in last 4 quarters||How frequently you need to deposit||Due Date for Deposits|
|More than $50,000||Every two weeks||1 week after every business payday|
|$50,000 or less||Every month||15th of the following month|
Here’s how much penalty you’re likely to incur:
|1 – 5 days late||2%|
|6 – 15 days late||5%|
|> 15 days late||10%|
|Within 10 days, but after receiving a notice for “immediate payment “||15%|
The penalties are pretty hefty for late filing of your quarterly payroll taxes. And this isn’t even the total amount you’ll pay. The IRS slaps interest on any outstanding amount that you have with them.
Penalty Abatement for Form 941 Late Payment Penalty and Form 941 Late Filing Penalty
If you failed at either filing the Form 941 or at making the deposit, you could request an abatement from the IRS.
They have a first-time penalty abatement called “FTA” (First-time Penalty Waiver), which may absolve you from the due penalties.
What qualifies as “a First Time Penalty”?
In order for you to obtain an FTA, you must have a clean history, which translates as “not having been penalized” in the last three years on the same issue.
Mistakes by IRS staff
The IRS is not perfect. If you have diligently filed your taxes and made payments promptly, then you might have been hit with a penalty by mistake. Another mistake that could allow you to claim for a waiver is that you acted under misinformation from IRS staff. This is unlikely but it happens.
In any event, a waiver due to mistakes will generally be recognized, and abatement will be granted.
So how do you go about requesting for an abatement?
That is where Form 843 comes in – “Claim for Refund and Request for Abatement.” A specialist like Curadebt can take all the paperwork off your hands and apply their expertise to give you a higher chance at penalty abatement.
How to Request for a Penalty abatement – Form 843
Form 843 allows you to get a refund on certain penalties, taxes, and interest. It cannot be used for income taxes, gift taxes or estate taxes. This form is applicable when you overpaid taxes because of errors made by the IRS itself or when there’s another strong reason to believe that the charge was no accurate.
Form 843 can also be used for penalties that you deem unjust or overcharged. Be careful, however, because the whole concept of filling the Form 843 is rather complicated as you will need to fill one for each tax period.
The information you must give in the form is the following:
- The date of the payment
- The type of the tax involved in the mishap
- The date when you got the notification from the IRS on the issue
- The precise period you’re asking abatement for
- The circumstances and the reasons why you think you should be abated
One more thing you should be aware of is that sometimes, the IRS itself can give bad advice through its officers or any other employee that works in the agency. If this is the case, you have to write “Request for Abatement of Penalty or Addition to Tax Under Section 6404(f) on the Form 843, preferably on the top, where it can be seen easily.
Of course, you will also have to provide the written advice you received from the IRS employee. That’s why it’s always a good idea to store all the letters you get from the agency in a safe place where you can get what you need without rummaging for days.
How to Avoid Penalties
It’s no mystery. As an employer you’re burdened with numerous responsibilities. You’re required to pay federal income taxes, FICA taxes (you probably know them better as Medicare and Social Security) and unemployment taxes, at both the federal and state level.
The best way to avoid late filings and payments (and subsequently penalties) is to hire an tax accountant. Your focus as a business owner should be geared towards running your business. Your business needs your strengths, and your weaknesses should be outsourced to a professional.
Similarly, if you’re already facing 941 penalties, then it would be wise to hire the help of a specialist that can quickly assess your situation and make the abatement application. In particular, I recommend a company like Curadebt (use their free evaluation tool and consultation at their website). The time saved will far outweigh any costs you incur in hiring these professionals.