TaxBandits Knowledge Base

What are the penalty rates for Form 941?

The IRS imposes penalties for two main reasons:

1. Failing to file Form 941
2. Failing to pay payroll taxes

If you fail to file Form 941 by the deadline, the IRS will impose a penalty of 5% of your total tax due for each month of delay, which can accumulate to a maximum of 25%.

In addition to the filing penalty, if you fail to pay the tax due, the IRS will initially charge a penalty of 0.5% of the unpaid tax amount. This penalty increases each month until the tax is paid, rising to 1% per ten days after you receive the IRS notice of intent to levy.

If you find yourself in either of these situations, you must pay the penalty directly to the IRS by contacting them at (800) 829-4933.

To avoid such penalties, be sure to follow this checklist:

• Pay the full tax amounts when they are due.
• Don’t wait until the last minute—file your Form 941 on time.
• Report your tax liability accurately.
• Ensure that all checks are valid.
• Provide your employees with the correct W-2 forms.
• Double-check that all entries are correct.
• Always verify your EIN before filing.