Example $3-6$

$1.$ On Friday, May $24,20--,$ Rogers, Ltd$.,$ a semiweekly depositor, pays wages and accumulates employment taxes. Rogers makes a deposit on Wednesday, May $29,$ in the amount of $$4,000.$ Later it was determined that Rogers was actually required to deposit $$4,080$ by Wednesday.

Rogers has a shortfall of $$80.$ The shortfall is less than the greater of $$100$ or $2\%$ of the amount required to be deposited. Therefore, Rogers satisfies the safe harbor rule so long as the $$80$ shortfall is deposited by Wednesday, June $19.$

$2.$ On Friday, October $4,20--,$ Vargan Company, a semiweekly depositor, pays wages and accumulates employment taxes. Vargan makes a deposit of $$30,000$ but later finds that the amount of the deposit should have been $$32,000.$

The $$2,000$ shortfall $($$$32,000$ $$30,000)$ exceeds the greater of $$100$ or $2\%$ of the amount required to be deposited $(2\%\backslash$times $$32,000=$ $$640).$ Thus, the safe harbor rule was not met. As a result, Vargan is subject to a failure$-$to$-$deposit penalty, as described later in this chapter.

Example $3-8$

Yeld Company failed to pay its employment taxes of $$5,000$ for March $20--($due April $15)$ until May $20.$ The failure to pay penalty assessed against Yeld Company is:

Line Item Description Amount

Failure to Pay Tax $($$$5,000\backslash$times $0\mathrm{.}5\%\backslash$times $2)=$ $$50\mathrm{.}00$

Interest on Taxes Due, assume a $7\%$ interest rate $($$$5,000\backslash$times $0\mathrm{.}07\backslash$times $35/365)=33\mathrm{.}56$

Total Penalty $=$ $$83\mathrm{.}56$

Note: In addition, a penalty for failure to make a timely deposit will also be assessed.

Example $3-9$

Greerson Inc. must make a deposit of $$1,800$ on June $15,20--.$ The deposit was made $11$ days late. The penalty assessed against Greerson is:

Failure to make timely deposit $($$$1,800\backslash$times $5\%)=$ $$90$

Vulcan Company is a monthly depositor whose tax liability for March $20--$ is $$2,505.$