26 U.S.C. § 6656
Authoritative Statutory Source
Payroll Tax Penalty (IRS Sec 6656)
Mandatory penalty levied by IRS for failing to deposit payroll taxes on time (2% to 15%).
Detailed Definition & Statutory Context
Payroll Tax Penalty (IRS Sec 6656) is governed by 26 U.S.C. § 6656 standards across corporate payroll administration, statutory tax withholding, and general ledger labor accounting. Rigorous compliance with Payroll Tax Penalty (IRS Sec 6656) prevents IRS Form 941 deposit penalties and FLSA wage-and-hour litigation.
Statutory Formula & Equation
Penalty = Undeposited Tax Amount × Statutory Tiered Penalty Rate % (2% - 15%)
General Ledger / Payroll Journal Entry Standard
Debit: Gross Payroll Expense / Employer Tax Expense
Credit: FICA Taxes Payable / Federal Income Tax Payable / Net Pay Cash
Credit: FICA Taxes Payable / Federal Income Tax Payable / Net Pay Cash
Common Operational Pitfalls
- Excluding non-discretionary bonuses from FLSA overtime regular-rate calculations.
- Failing to cap Social Security tax withholding once employee earnings exceed the $168,600 wage base.
- Misclassifying non-exempt hourly employees as exempt salaried workers.
Used in these Payroll Calculators
Source: https://www.irs.gov/payments/failure-to-deposit-penalty ↗