What is the consequence of not depositing FUTA when the required amount exceeds $500?

When an employer fails to deposit the Federal Unemployment Tax Act (FUTA) tax when the required amount exceeds $500, the primary consequence is the assessment of penalties and interest. The IRS expects timely deposits to ensure that funds are available for unemployment benefits, and if an employer does not comply with the deposit schedule, they may incur a failure-to-deposit penalty. This penalty can be a percentage of the unpaid tax amount, and interest may accrue on any unpaid balance. This encourages compliance and ensures that employers are fulfilling their tax responsibilities, which helps support the national unemployment insurance system.

While extra paperwork might sometimes be needed in the case of errors or adjustments, the significant repercussions for not making the required deposits primarily revolve around financial penalties and accrued interest. A credit reduction refers to a decrease in the credit an employer can take against state unemployment taxes when FUTA deposits are not made or when a state has borrowed money to cover unemployment claims, but that is more related to state compliance than the immediate failure of federal deposit. Therefore, the most substantial and direct consequence rests in the realm of penalties and interest.