The IRS recently published filing and penalty statistics for FY2004. A whopping 6.4 million penalties were doled out on the 30.4 million employer withholding returns filed — a rate of over 20%. A total of $2.47 billion in penalties was assessed. Over 90% of the companies that fall behind in their withholding taxes do so because of cash flow problems. They may not plan to do it ahead of time, but sometimes find themselves without the cash to make the payment on the day it is due. It may take the IRS a few months to realize a payment has been skipped, so at first it seems like easy money. But the penalties are stiff: 2% of the amount due for being just one day late, 5% for being 6 days late. If an employer files late there is a 5% per month (up tp 25%) penalty. Paying late can also add another 25% penalty, plus interest.
Innovative Strategies For Winning Tax Controversies, Business Structuring And Estate Planning
IRS Penalizes 20% of Business for Payroll Taxes