Amended 1981, 1989
- 1989 Pub. L. 101-239 Pub. L. 101–239 substituted “taxes” for “taxes or overstatement of deposits” as section catchline and amended text generally, revising substance and structure.
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 724(b)(1), inserted “or overstatement of deposits” after “taxes” in section catchline.
Cases: Babcock v. United States, 807 F. Supp. 2d 904 (C.D. Cal. 2009)
Final rules 2
(a) Underpayment of deposits In the case of any failure by any person to deposit (as required by this title or by regulations of the Secretary under this title) on the date prescribed therefor any amount of tax imposed by this title in such government depository as is authorized under section 6302(c) to receive such deposit, unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be imposed upon such person a penalty equal to the applicable percentage of the amount of the underpayment.
Amended 1969, 1976, 1981, 1986
- 1986 Pub. L. 99-509 Pub. L. 99–509 substituted “10 percent” for “5 percent”.
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 724(b)(3), substituted “Underpayment of deposits” for “Penalty” in heading.
- 1976 Pub. L. 94-455 Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
- 1969 Pub. L. 91-172 Pub. L. 91–172 substituted provisions imposing a penalty of five percent for the failure to deposit on the date prescribed any amount of tax imposed by this title, for provisions imposing a penalty of one percent of the amount of underpayment each month but not to exceed six percent in the aggregate.
Cases: Brewery, Inc. v. United States, 33 F.3d 589 (6th Cir. 1994)
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(b) Definitions For purposes of subsection (a)—
Amended 1981
- 1981 Pub. L. 97-34 Pub. L. 97–34, § 724(a), substituted provisions relating to conditions for imposition of penalties for overstated deposit claims and definition of “overstated deposit claim”, for provisions relating to imposition of penalties after due date for return.
(1) Applicable percentage
(A) In general Except as provided in subparagraph (B), the term “applicable percentage” means—
(i) 2 percent if the failure is for not more than 5 days,
(ii) 5 percent if the failure is for more than 5 days but not more than 15 days, and
(iii) 10 percent if the failure is for more than 15 days.
(B) Special rule In any case where the tax is not deposited on or before the earlier of—
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(i) the day 10 days after the date of the first delinquency notice to the taxpayer under section 6303, or
(ii) the day on which notice and demand for immediate payment is given under section 6861 or 6862 or the last sentence of section 6331(a),
the applicable percentage shall be 15 percent.
(2) Underpayment The term “underpayment” means the excess of the amount of the tax required to be deposited over the amount, if any, thereof deposited on or before the date prescribed therefor.
(c) Exception for first-time depositors of employment taxes The Secretary may waive the penalty imposed by subsection (a) on a person’s inadvertent failure to deposit any employment tax if—
Amended 1996
- 1996 Pub. L. 104-168 Pub. L. 104–168, § 304(a), added subsec. (c).
(1) such person meets the requirements referred to in section 7430(c)(4)(A)(ii),
Amended 1996
- 1996 Pub. L. 104-168 Pub. L. 104–168, § 701(c)(3), substituted “section 7430(c)(4)(A)(ii)” for “section 7430(c)(4)(A)(iii)”.
(2) such failure—
Amended 1998
- 1998 Pub. L. 105-206 Pub. L. 105–206, § 3304(b)(1), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “such failure occurs during the 1st quarter that such person was required to deposit any employment tax, and”.
(A) occurs during the first quarter that such person was required to deposit any employment tax; or
(B) if such person is required to change the frequency of deposits of any employment tax, relates to the first deposit to which such change applies, and
(3) the return of such tax was filed on or before the due date.
For purposes of this subsection, the term “employment taxes” means the taxes imposed by subtitle C.
(d) Authority to abate penalty where deposit sent to Secretary The Secretary may abate the penalty imposed by subsection (a) with respect to the first time a depositor is required to make a deposit if the amount required to be deposited is inadvertently sent to the Secretary instead of to the appropriate government depository.
Amended 1996
- 1996 Pub. L. 104-168 Pub. L. 104–168, § 304(a), added subsec. (d).
(e) Designation of periods to which deposits apply
Amended 1998
- 1998 Pub. L. 105-206 Pub. L. 105–206, § 3304(a), added subsec. (e).
(1) In general A deposit made under this section shall be applied to the most recent period or periods within the specified tax period to which the deposit relates, unless the person making such deposit designates a different period or periods to which such deposit is to be applied.
Amended 1998
- 1998 Pub. L. 105-206 Pub. L. 105–206, § 3304(c), reenacted heading without change and amended text of par. (1) generally. Prior to amendment, text read as follows: “A person may, with respect to any deposit of tax to be reported on such person’s return for a specified tax period, designate the period or periods within such specified tax period to which the deposit is to be applied for purposes of this section.”
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(2) Time for making designation A person may make a designation under paragraph (1) only during the 90-day period beginning on the date of a notice that a penalty under subsection (a) has been imposed for the specified tax period to which the deposit relates.