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Press release: April 7, 2005
U.S. Companies Assessed a Whopping $2.47 Billion In Withholding Tax Penalties by the IRS In FY2004 "Borrowing from a Loan Shark Seems Cheap by Comparison"
Click here for the full text of the press release
Some additional information:
The $2.47 billion was AFTER abatements of $2.76 billion in FY2004.
30.43 million employer withholding returns were filed in FY2004, and over 6.3 million penalties were assessed, after 1.45 million were abated. This corresponds to a penalty rate of 20.9% of employer withholding returns filed. This is up slightly from the rate of 20.67% in FY2003.
Borrowing from the IRS is equivalent to a 50% to 100% APR depending on how quickly you pay it back. Perversely, once you incur a penalty, it behooves you to stretch out repayment just as long as you can. There is a 2% penalty for being a 1 to 5 days late, 5% for being 6 to 15 days late, and 10% for 16 days and later.
However, once you work out a repayment schedule with the IRS, you get charged the standard IRS interest rate on the unpaid balance, which currently is around 8% per year.
IRS Withholding Penalties - Statistics for FY2001 to FY2004
(Data assembled by Luhring SurvivalWare, Inc.)
| FY2001 | FY2002 | FY2003 | FY2004 | |
| Number of withholding returns filed | 28,899,069 | 29,140,771 | 29,916,033 | 30,429,671 |
| Net number of penalties | 6,801,642 | 6,271,800 | 6,183,655 | 6,361,649 |
| Penalty Rate | 23.54% | 21.52% | 20.67% | 20.91% |
| Number of Penalties before abatement | ||||
| Employment taxes [4] | 8,512,594 | 7,763,552 | 7,649,296 | 7,813,859 |
| Delinquency | 1,343,314 | 1,445,547 | 1,470,183 | 1,614,918 |
| Failure to pay | 3,568,739 | 3,618,126 | 3,657,521 | 3,766,218 |
| Federal tax deposits | 3,499,865 | 2,594,659 | 2,409,231 | 2,313,900 |
| Bad check | 99,591 | 104,157 | 111,244 | 117,671 |
| Fraud | 210 | 231 | 263 | 383 |
| Negligence | 10 | 16 | 7 | -- |
| Other | 865 | 816 | 847 | 769 |
| Dollar amount of Penalties ($000) before abatement | ||||
| Employment taxes [4] | 6,228,943 | 6,216,145 | 6,187,833 | 5,231,655 |
| Delinquency | 710,026 | 808,658 | 861,656 | 886,788 |
| Failure to pay | 427,106 | 507,274 | 561,540 | 595,280 |
| Federal tax deposits | 5,042,688 | 4,869,436 | 4,675,038 | 3,722,213 |
| Bad check | 17,911 | 16,860 | 31,887 | 17,620 |
| Fraud | 14,933 | 5,755 | 4,489 | 5,195 |
| Negligence | 1 | 2,958 | 51 | -- |
| Other | 16,277 | 5,204 | 53,171 | 4,558 |
| Number of Net Civil Penalties (after abatement) | ||||
| Employment taxes [4] | 6,801,642 | 6,271,800 | 6,183,655 | 6,361,649 |
| Delinquency | 1,164,600 | 1,262,765 | 1,275,441 | 1,406,310 |
| Failure to pay | 2,843,743 | 2,922,106 | 2,966,267 | 3,067,181 |
| Federal tax deposits | 2,700,807 | 1,989,618 | 1,837,176 | 1,777,027 |
| Bad check | 91,625 | 96,485 | 103,784 | 110,070 |
| Fraud | 198 | 197 | 243 | 363 |
| Negligence | 4 | -22 | -12 | -5 |
| Other | 665 | 651 | 756 | 703 |
| Amount ($000) of Net Civil Penalties (after abatement) | ||||
| Employment taxes [4] | 2,691,021 | 2,767,751 | 2,384,007 | 2,472,815 |
| Delinquency | 507,913 | 562,009 | 557,636 | 582,651 |
| Failure to pay | 307,061 | 355,882 | 378,361 | 421,100 |
| Federal tax deposits | 1,841,199 | 1,827,500 | 1,428,404 | 1,451,414 |
| Bad check | 5,369 | 9,720 | 7,868 | 8,797 |
| Fraud | 14,834 | 5,630 | 3,612 | 4,573 |
| Negligence | -7 | 2,454 | 35 | -39 |
| Other | 14,651 | 4,556 | 8,091 | 4,318 |
| Number of Penalties Abated | ||||
| Employment taxes [4] | 1,710,952 | 1,491,752 | 1,465,641 | 1,452,210 |
| Delinquency | 178,714 | 182,782 | 194,742 | 208,608 |
| Failure to pay | 724,996 | 696,020 | 691,254 | 699,037 |
| Federal tax deposits | 799,058 | 605,041 | 572,055 | 536,873 |
| Bad check | 7,966 | 7,672 | 7,460 | 7,601 |
| Fraud | 12 | 34 | 20 | 20 |
| Negligence | 6 | 38 | 19 | 5 |
| Other | 200 | 165 | 91 | 66 |
| Amount of Penalties Abated | ||||
| Employment taxes [4] | 3,537,922 | 3,448,395 | 3,803,826 | 2,758,840 |
| Delinquency | 202,113 | 246,648 | 304,020 | 304,137 |
| Failure to pay | 120,045 | 151,392 | 183,179 | 174,180 |
| Federal tax deposits | 3,201,489 | 3,041,936 | 3,246,635 | 2,270,799 |
| Bad check | 12,542 | 7,141 | 24,019 | 8,823 |
| Fraud | 99 | 125 | 877 | 622 |
| Negligence | 7 | 504 | 16 | 39 |
| Other | 1,626 | 648 | 45,080 | 240 |
| Percent of Penalties Abated - based on Number | ||||
| Employment taxes [4] | 20.10% | 19.21% | 19.16% | 18.59% |
| Delinquency | 13.30% | 12.64% | 13.25% | 12.92% |
| Failure to pay | 20.32% | 19.24% | 18.90% | 18.56% |
| Federal tax deposits | 22.83% | 23.32% | 23.74% | 23.20% |
| Bad check | 8.00% | 7.37% | 6.71% | 6.46% |
| Fraud | 5.71% | 14.72% | 7.60% | 5.22% |
| Negligence | 60.00% | 237.50% | 271.43% | 0.00% |
| Other | 23.12% | 20.22% | 10.74% | 8.58% |
| Percent of Penalties abated - Amount | ||||
| Employment taxes [4] | 56.80% | 55.47% | 61.47% | 52.73% |
| Delinquency | 28.47% | 30.50% | 35.28% | 34.30% |
| Failure to pay | 28.11% | |||