When IRS Requires Electronic Depositing of Taxes, Depositing Non-Electronically Results in Penalties.

The plaintiff is a fiduciary of pension plans, IRAs and employee benefit plans for which it is responsible for withholding federal income taxes.  The plaintiff timely and fully deposited all withheld income taxes, but didn't do so electronically as required by IRS regulations when the deposit exceeds $200,000.  IRS assessed failure-to-deposit penalties of over $250,000 by virtue of I.R.C. Sec. 6656(a).  The court upheld the IRS position based on the plain language of the statute and the fact that the Congress had allowed a grace period from the electronic deposit rule at issue from July 1, 1997 to July 1, 1998, and that no grace period any longer applied.  Commonwealth Bank and Trust Company v. United States, No. 3:13-CV-01204-CRS, 2014 U.S. Dist. LEXIS 91489 (W.D. Ky. Jul. 7, 2014).