A late payroll tax deposit does not stay one number for long. The IRS failure-to-deposit penalty climbs in tiers the longer the deposit sits unpaid, and interest compounds daily on top of it. Enter the unpaid deposit amount and how many days late it is to estimate the current penalty tier and interest.
941 Late Deposit Penalty Calculator
Estimate the IRS failure-to-deposit penalty on a late payroll tax deposit, plus daily interest.
The employment tax deposit that was not made on time.
Counted from the deposit due date. The IRS penalty tier is set by this number.
Enter a deposit amount greater than $0.
Unpaid payroll tax also carries the Trust Fund Recovery Penalty under IRC Section 6672. The IRS can assess the withheld trust fund portion, the income tax and employee Social Security and Medicare, personally against owners, officers, and anyone with authority over payroll. It equals 100% of that withheld amount, follows the individual even if the business closes, and is separate from the deposit penalty above. It is not a rate you can calculate, which is why it is not included in the figure.
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How this is calculated. The IRS failure-to-deposit penalty is a one-time penalty on the unpaid deposit: 2% at 1 to 5 days late, 5% at 6 to 15 days, 10% past 15 days, and 15% once the IRS issues a notice demanding payment. The tiers do not stack. The higher rate replaces the lower one rather than adding to it. Interest is separate and compounds daily until the balance is paid. This tool provides an estimate for planning only and is not tax or legal advice.
Sources: IRS Failure to Deposit Penalty (IRC § 6656) and IRS Quarterly Interest Rates.
How the IRS calculates the failure-to-deposit penalty
The penalty is set by how many calendar days late the deposit is, counted from its due date. It is a one-time penalty on the unpaid deposit, not a monthly charge, and it is defined under Internal Revenue Code Section 6656.
| How late the deposit is | Penalty on the unpaid deposit |
|---|---|
| 1 to 5 calendar days | 2% |
| 6 to 15 calendar days | 5% |
| More than 15 calendar days | 10% |
| More than 10 days after the first IRS notice, or the day you receive a demand for immediate payment (for example, a CP220 or CP504J) | 15% |
One detail the calculator handles that most owners miss: the tiers do not add together. If a deposit is more than 15 days late, the IRS applies the 10 percent rate to that deposit, not 2 plus 5 plus 10. The higher tier replaces the lower one. The 15 percent tier is also different from the others, because it is triggered by an IRS notice rather than a day count, which is why the tool asks about notices separately. You can review the underlying rule on the IRS failure-to-deposit penalty page.
Interest keeps compounding on top
The penalty is only part of the balance. Interest accrues daily on the unpaid tax and on the penalty itself, and the IRS resets the rate every quarter. For the quarter beginning July 1, 2026 it is 7 percent for most balances, and 9 percent for large corporate underpayments. Because it compounds daily, a payroll balance left unresolved grows faster than most owners expect. To model the failure-to-file and failure-to-pay penalties on an income tax balance instead, the broader IRS penalty and interest calculator covers those. The current figures come straight from the IRS quarterly interest rates.
What to do if you are behind on 941 deposits
The penalty stops growing once the balance is resolved, and there is usually more than one way to get there. Which path fits depends on how much is owed, whether the business is still operating, and your ability to pay. The full breakdown of the mechanics and the personal-liability exposure is covered in our guide to what business owners owe when 941 deposits fall behind.
An IRS installment agreement sets a structured monthly payment and stops most active collection once approved. An Offer in Compromise settles the debt for less than the full amount, though it is harder to obtain for an operating business with assets. If the business genuinely cannot pay, Currently Not Collectible status pauses collection without erasing the debt. And where the miss had a defensible cause, penalty abatement through First-Time Abatement or Reasonable Cause can reduce the penalty layer itself. Most payroll cases combine several of these, and the full resolution process is laid out in our walkthrough of how to settle business payroll tax debt.
How Omni Tax Help handles payroll tax cases
Omni Tax Help is a national tax debt resolution firm with over 20 years of experience and more than $203 million in tax liability managed. Our enrolled agents and tax experts represent business owners directly in front of the IRS, with particular focus on payroll tax relief for businesses and the personal liability that comes with it. We pull your transcripts, get you current, take over IRS communication, and build the resolution that fits your numbers.
“They helped us with 2 issues and they did exactly what they said they would do.” — Business Owner (verified review)
Frequently Asked Questions
How is the 941 late deposit penalty calculated?
The IRS applies a failure-to-deposit penalty as a percentage of the unpaid deposit, based on how many calendar days late it is: 2 percent at 1 to 5 days, 5 percent at 6 to 15 days, 10 percent past 15 days, and 15 percent once the IRS issues a notice demanding payment. It is a one-time penalty on the deposit, not a monthly charge, and interest accrues separately.
Do the penalty tiers stack on top of each other?
No. The tiers do not add together. If a deposit is more than 15 days late, the IRS charges 10 percent, not 2 plus 5 plus 10. The higher rate replaces the lower one. This calculator applies the single correct tier rather than stacking them.
How much interest does the IRS charge on late payroll deposits?
Interest compounds daily at a rate the IRS resets each quarter. For the quarter beginning July 1, 2026 it is 7 percent for most balances and 9 percent for large corporate underpayments. Interest runs on both the unpaid tax and the penalty until the balance is paid in full.
Does the calculator include the Trust Fund Recovery Penalty?
No, because the Trust Fund Recovery Penalty is a personal-liability assessment, not a rate you multiply against a deposit. Under IRC Section 6672 the IRS can assess the withheld portion of the payroll tax personally against responsible individuals, equal to 100 percent of that amount. The calculator flags this exposure but does not fold it into the estimate.
Can the late deposit penalty be removed?
Sometimes. First-Time Abatement is available with a clean three-year compliance history, and Reasonable Cause abatement applies when something outside your control caused the miss, such as illness, a disaster, or a payroll provider that failed to deposit. You request relief through a written statement or Form 843. Interest only comes off to the extent it is tied to a penalty that is removed.
Is this calculator official or a substitute for IRS figures?
It is an estimate for planning, not tax or legal advice. The penalty tiers come directly from the IRS failure-to-deposit rules and the interest rate from the current IRS quarterly rate, but your exact balance depends on your transcripts and the specific dates involved. A free consultation confirms the real number.
How do I stop payroll tax penalties from growing?
Get current on new deposits, file any missing returns, and enter a formal resolution such as an installment agreement, an Offer in Compromise, or Currently Not Collectible status. Penalties and interest stop building once the balance is resolved. Because payroll cases carry personal Trust Fund Recovery Penalty exposure, most owners have a representative handle it so the process does not accidentally accelerate a personal assessment.
Related: IRS Notice CP504B: notice of intent to levy for businesses
You have the estimate. Now get the real number and a plan.
Payroll tax penalties reach your business and you personally at the same time, and interest compounds every day the balance sits. A free, confidential consultation tells you exactly where you stand and what can be done about it.Free, confidential consultation. Message us anytime. Phone Mon–Fri, 8 AM–5 PM ET.