Here is a problem we see more often than people think. A small New York business pays one part-time employee during the year. Its payroll software ran the paycheck but never filed the quarterly returns or sent the tax deposits. Nobody noticed until months later. Here is what happens next, and how to fix it with the least damage.
What was missed
Even one paycheck in a quarter creates filing duties:
- Federal Form 941 for that quarter, reporting the wages, federal income tax withheld, and Social Security and Medicare tax. It is due the last day of the month after the quarter ends (April 30, July 31, October 31, January 31).
- New York Form NYS-45, which combines New York withholding, unemployment insurance and the wage report. Same due dates.
- The tax deposits themselves. Withheld tax and the employer's share have to be deposited on schedule, not just reported.
If the software also skipped the quarter before (for example, the employee was hired at the end of March), that quarter's NYS-45 may be missing too.
What it costs if you leave it
| Penalty | How it works |
|---|---|
| IRS failure to file (941) | 5% of the unpaid tax for each month late, up to 25% |
| IRS failure to deposit | 2% to 15% of the late deposit, depending on how late |
| IRS failure to pay | 0.5% a month on what is still unpaid |
| New York (NYS-45) | Late filing and late payment penalties plus interest on withholding and unemployment insurance |
On one part-time paycheck the dollars are usually small. The bigger risk is letting notices pile up, and the fact that the IRS can hold owners personally responsible for withheld payroll taxes that were never paid over.
How we fix it
- Get the facts from the pay stub: gross pay, what was withheld, the pay date. That tells us exactly what each return should say.
- File the missing returns now, before the agencies send notices. Filing late is always better than not filing, and it stops the failure-to-file penalty from growing.
- Pay the tax (or confirm it was paid) so the interest stops.
- Ask for the penalties to be removed. The IRS has a first-time abatement policy: if the business has a clean record for the prior three years and is now current, penalties are usually waived on request. New York reviews penalty relief on a reasonable-cause basis, and a documented software failure that was fixed promptly is a reasonable story to tell.
- Make sure the next quarter files correctly, either by fixing the software settings or moving payroll somewhere that does file.
How to avoid it
Payroll software is only as good as its setup. Once a quarter, check that a 941 and an NYS-45 actually show as filed with the agencies, not just generated inside the app. If you run payroll yourself, put the four due dates on your calendar. If you would rather not think about it, our payroll service is $300 a month including your first employee, with every federal and New York filing included.
Already behind? See our IRS and New York notice help page, or call (516) 518-6678 for a flat quote.