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% $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 0.5% 2)	=		$50.00
Interest on Taxes Due, assume a 7% interest rate ($5,000 0.07 35/365)	=		33.56
Total Penalty	=		$83.56

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 5%) = $90

Vulcan Company is a monthly depositor whose tax liability for March 20-- is $2,940.

1. What is the due date for the deposit of these taxes?

March 17March 31April 15April 15

2. Assume that no deposit was made until April 29 (14 days late). Compute the following penalties. Assume a 365-day year in your computations. Round your answers to the nearest cent.

	Line Item Description	Amount
a.	Penalty for failure to make timely deposit.	fill in the blank 1 of 1$
b.	Penalty for failure to fully pay tax.	fill in the blank 1 of 1$
c.	Interest on taxes due and unpaid (assume a 7% interest rate).	fill in the blank 1 of 1$
d.	Total penalty imposed.	fill in the blank 1 of 1$

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1. Determine correct due date of monthly deposit. 2.

1. Determine penalty for failure to make timely deposit: $______
2. Determine penalty for failure to fully pay tax: $______ per month
3. Determine annual interest (based on 365 days): $______
4. Equals the total penalty imposed: $ ________