
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC6656]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                Subtitle F--Procedure and Administration
 
  CHAPTER 68--ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE 
                                PENALTIES
 
        Subchapter A--Additions to the Tax and Additional Amounts
 
                       PART I--GENERAL PROVISIONS
 
Sec. 6656. Failure to make deposit of taxes


(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) Definitions

    For purposes of subsection (a)--

                      (1) Applicable percentage

        (A) In general

            Except 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 rule

            In 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 taxes

    The 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 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.

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

                     Amendment of Subsection (e)(1)

        Pub. L. 105-206, title III, Sec. 3304(c), (d), July 22, 1998, 
    112 Stat. 742, provided that, applicable to deposits required to be 
    made after Dec. 31, 2001, subsection (e)(1) of this section is 
    amended to read as follows:
(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.


                               Amendments

    1998--Subsec. (c)(2). Pub. L. 105-206, Sec. 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, Sec. 3304(a), added subsec. (e).
    1996--Subsec. (c). Pub. L. 104-168, Sec. 304(a), added subsec. (c).
    Subsec. (c)(1). Pub. L. 104-168, Sec. 701(c)(3), substituted 
``section 7430(c)(4)(A)(ii)'' for ``section 7430(c)(4)(A)(iii)''.
    Subsec. (d). Pub. L. 104-168, Sec. 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, Sec. 724(b)(1), inserted ``or overstatement of 
deposits'' after ``taxes'' in section catchline.
    Subsec. (a). Pub. L. 97-34, Sec. 724(b)(3), substituted 
``Underpayment of deposits'' for ``Penalty'' in heading.
    Subsec. (b). Pub. L. 97-34, Sec. 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.


                    Effective Date of 1998 Amendment

    Pub. L. 105-206, title III, Sec. 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

    Section 304(b) of Pub. L. 104-168 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

    Section 7742(c) of Pub. L. 101-239 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

    Section 8001(b) of Pub. L. 99-509 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

    Section 724(c) of Pub. L. 97-34 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.

                  Section Referred to in Other Sections

    This section is referred to in sections 5684, 5761 of this title.
