Page 222 - Essentials of Payroll: Management and Accounting

Payr oll Taxes and Remittances
Penalties can be avoided for very small payment shortfalls. There is
no penalty if a deposit of up to $5,000 is short by no more than $100,
or a larger deposit is short by no more than 2 percent of the total. If a
shortfall of this size occurs, a semiweekly depositor must deposit the

shortfall by the earlier of the next Form 941 due date or the first
Wednesday or Friday following the fifteenth day of the next month. A
monthly depositor must make the deposit with its next Form 941.
If an employer does not file its quarterly Form 941 in a timely
manner, it will be penalized 5 percent for the amount of all net unpaid
taxes shown on the return for each month during which the form is
not filed. This penalty is capped at 25 percent, which essentially means

that a business will be penalized for the first five months during which
it does not file a Form 941.

T IPS &T ECHNIQUES

A company that acquires another business should closely examine
the acquiree’s payroll remittances to ensure that all remittances
have been made. By doing so, it can determine if a liability for unpaid
withholdings lurks, one that might not crop up for several years, when
federal or state auditors file claims that may include stiff penalties and
interest charges. (Note: This is an issue only if the acquiring entity
purchases the other business as a going concern, since it takes on
all liabilities of the acquired entity. A purchase of business assets will
not present this problem.)
A potential flag for remittance problems is that an acquiree does all
of its own remittance filings, rather than using the services of a pay-
roll provider. In this case, there is a greater risk that remittances were
sporadically made or never made. Anyone conducting a due diligence
review of such a company should establish that every remittance was
made in sequence, that cashed checks verify the transfer of funds to
the government, and that the amounts paid match the amounts cal-
culated as due and payable in the payroll register.

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