941 1st time experience

[Ray]

I do the quarterlies for a small chiropractic firm. The secretary has a little trouble with figuring the monthly payroll deposit so I have her just deposit a set amount - $1400 each month and I pick up the balance with the 941.
For the 3rd Qtr of 07 (Jul, Aug, Sep) she had all her $1400 deposits made on time - the last one was deposited before the 15th of Oct and I did the 941 that showed a balance due of $210. This $210 was sent in October 30 with the 941.
Yesterday we get a notice that a 10% penalty has been assessed ($21) for delinquent payment.
I have never had this happen and was wondering if the IRS is now requiring 100% deposit by the 15th.
Has anyone else had this problem??

[Black Bart]

Hmmm; well, no

I do the quarterlies for a small chiropractic firm. The secretary has a little trouble with figuring the monthly payroll deposit so I have her just deposit a set amount - $1400 each month and I pick up the balance with the 941.
For the 3rd Qtr of 07 (Jul, Aug, Sep) she had all her $1400 deposits made on time - the last one was deposited before the 15th of Oct and I did the 941 that showed a balance due of $210. This $210 was sent in October 30 with the 941.
Yesterday we get a notice that a 10% penalty has been assessed ($21) for delinquent payment.
I have never had this happen and was wondering if the IRS is now requiring 100% deposit by the 15th.
Has anyone else had this problem??

I haven't (yet), but maybe it's because all my clients are small potatoes. By that, I mean that they all owe less than the $2,500 total taxes which requires you to fill in the three monthly liability lines on the back of the 941.

I've got a couple of clients that do it the same way you do (a fixed monthly amount) and it's handy/easy for them and me both to keep track of -- they usually end up like yours, owing maybe $200 or so. Still, I thought that if you ran over the $2,500 then the rule's always been that you had to deposit the whole shebang to avoid penalties. If you've been doin' it like that a long time and gettin' by with it, I'm not surprised since it's just amazing what IRS does not pick up on, but anyway I'm thinkin' that they (IRS-aka "The Boogeyman") are right about your pen and wantin' 100% put in the bank by the 15th.

Other opinions? Just jump right in, fellers.

[outwest]

Here's how it probably worked..

First the threshold is 95% as I recall. The 1st payment was a little short so some of the 2nd was applied the the 1st. The 2nd was a little short itself so it was now "double" short. Part of the 3rd was applied to the 2nd double short making the 3rd "triple" short where it now fell below the threshold. The penalty was applied to the shortage on the third one.

The final payment was on the 30th which is in the 10% penalty range for a deposit due on the 15th.

Solution: finish the 941 by the 15th. Then you can continue this practice.

[Black Bart]

A double, then

...2nd was a little short itself so it was now "double" short. Part of the 3rd was applied to the 2nd double short making the 3rd "triple" short where it now fell below the threshold. The penalty was applied to the shortage on the third one.

a triple, then struck out while rounding third.

[JohnH]

Another solution

For a little penalty insurance, you could also have them "over-deposit" each month by $100 or so more than the estimated amount due, then carry the overpayment on each 941 into the next quarter. Square it all up on the 4Q 941 and claim a refund.

[BOB W]

If this is the first time this has happened you can request an abatement as a first time offender. Going forward you should do as John H stated "over pay each month and credit overpayment to next qtr".

[SunTaxMan]

941 deposits

Can I suggest a different strategy?

Deposit EVERY payroll's liability within 3 days of the payroll.

Wouldn't this eliminate the issue?

And to "calculate" the appropriate deposit liability, whether for each payroll or for a month at a time - give client a spreadsheet to "plug in" the payroll figures - the spreadsheet gives them the total liability.

I have been less than happy with the "cover sheet" produced by the payroll software I use, so I designed my own (Excel). Part of the calculation here is federal liability.

One more option, as they "tire" of this issue, you could suggest that YOU do their payroll, or at least calculate the deposit liability for them.

[Black Bart]

Excellent suggestion, Suntanman

Can I suggest a different strategy?

Deposit EVERY payroll's liability within 3 days of the payroll.

Wouldn't this eliminate the issue?

.

And while I'm doin' it, I think I'll throw in the following:

1. Proclaim world peace.
2. Decree universal happiness.
3. Banish obesity

Yuk, yuk; just joshin' you there a little bit, Suntaxer, but, shoot, I mean, manned spaceflight's possible, but it ain't easy. I've got clients who don't open their mail ever' three days, much less make tax deposits. Only way I could pull that off is to have 'em like they do on that TV show "Cops," i.e. "I've got him at gunpoint."

[outwest]

You probably meant..

a triple, then struck out while rounding third.

Thrown out heading for home....

[SunTaxMan]

Ad nauseum....

Habits are a good way to deal with a problem.

Perhaps a better suggestion would be do to the deposit AS PART OF THE PAYROLL, rather than "later."

When the check is written to move money to the Payroll account, also write the check for the deposit, or......

when the online transfer to the Payroll account is made, also do the EFTPS deposit.