26 U.S.C. § 6656

Failure to make deposit of taxes

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(a) Underpayment of deposits

In the case of any failure by any person to deposit (as required by this title or by regulations of the Secretary under this title) on the date prescribed therefor any amount of tax imposed by this title in such government depository as is authorized under section 6302(c) to receive such deposit, unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be imposed upon such person a penalty equal to the applicable percentage of the amount of the underpayment.

(b) DefinitionsFor purposes of subsection (a)—(1) Applicable percentage(A) In generalExcept as provided in subparagraph (B), the term “applicable percentage” means—(i) 2 percent if the failure is for not more than 5 days,(ii) 5 percent if the failure is for more than 5 days but not more than 15 days, and(iii) 10 percent if the failure is for more than 15 days.(B) Special ruleIn any case where the tax is not deposited on or before the earlier of—(i) the day 10 days after the date of the first delinquency notice to the taxpayer under section 6303, or(ii) the day on which notice and demand for immediate payment is given under section 6861 or 6862 or the last sentence of section 6331(a),the applicable percentage shall be 15 percent.(2) Underpayment

The term “underpayment” means the excess of the amount of the tax required to be deposited over the amount, if any, thereof deposited on or before the date prescribed therefor.

(c) Exception for first-time depositors of employment taxesThe Secretary may waive the penalty imposed by subsection (a) on a person’s inadvertent failure to deposit any employment tax if—(1) such person meets the requirements referred to in section 7430(c)(4)(A)(ii),(2) such failure—(A) occurs during the first quarter that such person was required to deposit any employment tax; or(B) if such person is required to change the frequency of deposits of any employment tax, relates to the first deposit to which such change applies, and(3) the return of such tax was filed on or before the due date.For purposes of this subsection, the term “employment taxes” means the taxes imposed by subtitle C.(d) Authority to abate penalty where deposit sent to Secretary

The Secretary may abate the penalty imposed by subsection (a) with respect to the first time a depositor is required to make a deposit if the amount required to be deposited is inadvertently sent to the Secretary instead of to the appropriate government depository.

(e) Designation of periods to which deposits apply(1) In general

A deposit made under this section shall be applied to the most recent period or periods within the specified tax period to which the deposit relates, unless the person making such deposit designates a different period or periods to which such deposit is to be applied.

(2) Time for making designation

A person may make a designation under paragraph (1) only during the 90-day period beginning on the date of a notice that a penalty under subsection (a) has been imposed for the specified tax period to which the deposit relates.

(Aug. 16, 1954, ch. 736, 68A Stat. 826; Pub. L. 91–172, title IX, § 943(b), Dec. 30, 1969, 83 Stat. 728; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834; Pub. L. 97–34, title VII, § 724(a), (b)(1), (3), Aug. 13, 1981, 95 Stat. 344, 345; Pub. L. 99–509, title VIII, § 8001(a), Oct. 21, 1986, 100 Stat. 1951; Pub. L. 101–239, title VII, § 7742(a), Dec. 19, 1989, 103 Stat. 2405; Pub. L. 104–168, title III, § 304(a), title VII, § 701(c)(3), July 30, 1996, 110 Stat. 1458, 1464; Pub. L. 105–206, title III, § 3304(a)–(c), July 22, 1998, 112 Stat. 742.)Editorial NotesAmendments

1998—Subsec. (c)(2). Pub. L. 105–206, § 3304(b)(1), amended par. (2) generally. Prior to amendment, par. (2) read as follows: “such failure occurs during the 1st quarter that such person was required to deposit any employment tax, and”.

Subsec. (e). Pub. L. 105–206, § 3304(a), added subsec. (e).

Subsec. (e)(1). Pub. L. 105–206, § 3304(c), reenacted heading without change and amended text of par. (1) generally. Prior to amendment, text read as follows: “A person may, with respect to any deposit of tax to be reported on such person’s return for a specified tax period, designate the period or periods within such specified tax period to which the deposit is to be applied for purposes of this section.”

1996—Subsec. (c). Pub. L. 104–168, § 304(a), added subsec. (c).

Subsec. (c)(1). Pub. L. 104–168, § 701(c)(3), substituted “section 7430(c)(4)(A)(ii)” for “section 7430(c)(4)(A)(iii)”.

Subsec. (d). Pub. L. 104–168, § 304(a), added subsec. (d).

1989—Pub. L. 101–239 substituted “taxes” for “taxes or overstatement of deposits” as section catchline and amended text generally, revising substance and structure.

1986—Subsec. (a). Pub. L. 99–509 substituted “10 percent” for “5 percent”.

1981—Pub. L. 97–34, § 724(b)(1), inserted “or overstatement of deposits” after “taxes” in section catchline.

Subsec. (a). Pub. L. 97–34, § 724(b)(3), substituted “Underpayment of deposits” for “Penalty” in heading.

Subsec. (b). Pub. L. 97–34, § 724(a), substituted provisions relating to conditions for imposition of penalties for overstated deposit claims and definition of “overstated deposit claim”, for provisions relating to imposition of penalties after due date for return.

1976—Subsec. (a). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.

1969—Subsec. (a). Pub. L. 91–172 substituted provisions imposing a penalty of five percent for the failure to deposit on the date prescribed any amount of tax imposed by this title, for provisions imposing a penalty of one percent of the amount of underpayment each month but not to exceed six percent in the aggregate.

Statutory Notes and Related SubsidiariesEffective Date of 1998 Amendment

Pub. L. 105–206, title III, § 3304(d), July 22, 1998, 112 Stat. 742, provided that:“(1)In general.—The amendments made by this section [amending this section] shall apply to deposits required to be made after the 180th day after the date of the enactment of this Act [July 22, 1998].“(2)Application to current liabilities.—The amendment made by subsection (c) [amending this section] shall apply to deposits required to be made after December 31, 2001.”

Effective Date of 1996 Amendment

Pub. L. 104–168, title III, § 304(b), July 30, 1996, 110 Stat. 1459, provided that: “The amendment made by subsection (a) [amending this section] shall apply to deposits required to be made after the date of the enactment of this Act [July 30, 1996].”

Amendment by section 701(c)(3) of Pub. L. 104–168 applicable in case of proceedings commenced after July 30, 1996, see section 701(d) of Pub. L. 104–168, set out as a note under section 6404 of this title.

Effective Date of 1989 Amendment

Pub. L. 101–239, title VII, § 7742(c), Dec. 19, 1989, 103 Stat. 2405, provided that: “The amendments made by this section [amending this section] shall apply to deposits required to be made after December 31, 1989.”

Effective Date of 1986 Amendment

Pub. L. 99–509, title VIII, § 8001(b), Oct. 21, 1986, 100 Stat. 1951, provided that: “The amendment made by subsection (a) [amending this section] shall apply to penalties assessed after the date of the enactment of this Act [Oct. 21, 1986].”

Effective Date of 1981 Amendment

Pub. L. 97–34, title VII, § 724(c), Aug. 13, 1981, 95 Stat. 345, provided that: “The amendments made by this section [amending this section and sections 5684 and 5761 of this title] shall apply to returns filed after the date of the enactment of this Act [Aug. 13, 1981].”

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172 applicable with respect to deposits the time for making of which is after Dec. 31, 1969, see section 943(d) of Pub. L. 91–172, set out as a note under section 6651 of this title.

Notes of Decisions

Cited in 61 cases (2 in the last 5 years), 1957–2023 · leading case: Babcock v. United States, 807 F. Supp. 2d 904 (C.D. Cal. 2009).

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Babcock v. United States, 807 F. Supp. 2d 904 (C.D. Cal. 2009). · cites it 7× “Taxpayers Generally Have a Limited Right to Designate Deposits, Pursuant to 26 U.S.C. § 6656 . Congress has afforded taxpayers a limited statutory right to designate tax deposits following the failure to deposit taxes.”

Brewery, Inc. v. United States, 33 F.3d 589 (6th Cir. 1994). · cites it 4× “§ 6651 (a)(2), and failure to deposit taxes pursuant to 26 U.S.C. § 6656 (a) for tax years 1988, 1989, and for the first two quarters of 1990.”

Dana Corp. v. United States, 764 F. Supp. 482 (N.D. Ohio 1991). · cites it 3× “*484 Background Plaintiff, Dana Corporation (Dana), has brought this action against defendant, United States of America (hereinafter referred to as the IRS), seeking the refund of penalties imposed on it pursuant to 26 U.S.C. § 6656 (a) of the Internal Revenue Code.”

FE Schumacher Co., Inc. v. United States, 308 F. Supp. 2d 819 (N.D. Ohio 2004). · cites it 7× “Specifically, the penalties were imposed under 26 U.S.C. § 6656 : (a) Underpayment of deposits.”

Diamond Plating Co. v. United States, 390 F.3d 1035 (7th Cir. 2004). · cites it 2× “§ 6651 (a)(2), and for failure to deposit taxes under 26 U.S.C. § 6656 (a). The penalties totaled over $130,000.”

In Re Rasbury, 130 B.R. 990 (Bankr. N.D. Ala. 1991). · cites it 2× “Likewise, when asked a question on how the 26 U.S.C. § 6656 3 penalty sought by the government was computed, Ms.”

Consol. Flooring Servs. v. United States, 38 Fed. Cl. 450 (Fed. Cl. 1997). · cites it 3× “Defendant further assessed a failure to deposit penalty pursuant to 26 U.S.C. § 6656 of the Internal Revenue Code.”

Boles Trucking, Inc., Appellee/cross-Appellant v. United States of Am., Appellant/cross-Appellee, 77 F.3d 236 (8th Cir. 1996). “Where an employer fails to file timely employment or unemployment tax returns or fails to make deposits of taxes, the Code provides for additions to the tax in the way of penalties.”

Roger Byrne v. United States, 857 F.3d 319 (6th Cir. 2017). “The IRS may impose penalties against delinquent employers, see for example 26 U.S.C. §§ 6656 , *327 7202, 7215, and may hold certain employers personally liable, as in this case, 26 U.”

Bossert v. United States (In Re Bossert), 201 B.R. 553 (Bankr. E.D. Wash. 1996). · cites it 3× “86 943 12/31/87 Failure to Deposit 26 USC § 6656 896.16 $1,643.43 Section 26 U.”

Staff IT, Inc. v. United States, 482 F.3d 792 (5th Cir. 2007). “§ 6651 (a)(2); and (3) late-deposit penalties *797 for all three quarters at issue, pursuant to 26 U.S.C. § 6656 . On November 7, 2003, the IRS sent S.”

Univ. of Chicago v. United States, 547 F.3d 773 (7th Cir. 2008). “26 U.S.C. § 6656 . Failure-to-pay penalties are imposed for a failure to pay an amount required to be shown on a tax return or failure to pay an assessment within the requisite time frame.”

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