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Penalty & Interest (P&I)

Understand penalties and interest charges to ensure timely tax payments and avoid extra costs.

Penalty and interest overview

Penalty and interest (P&I) charges are created when a tax deposit is late or underpaid. While penalties and interest are often related, they are not always assessed at the same time.

Why penalties and interest occur

When a deposit is late or less than the amount due, the tax agency may assess a penalty and begin charging interest on the unpaid amount. The employer typically receives a tax notice detailing:

  • The reason for the penalty (e.g., late or incomplete deposit)
  • The amount of interest charged
  • Instructions for how to remit payment

Penalty

Penalties are typically a one-time charge for the missed or late payment.

  • Example: A $50 late payment fee.

Interest

Interest accrues on the unpaid tax amount over time, following the agency’s schedule until the balance is paid in full.

How OnTheClock handles penalties and interest

Previously, OnTheClock remitted penalty and interest payments directly to agencies on behalf of companies. Effective November 1, 2025, employers will remit their own payments, while OnTheClock will reimburse employers directly in certain cases.

OnTheClock reimburses employers for:

  • Small penalty and interest amounts
  • Penalty and interest assessed due to OnTheClock or Partner error. Note: if a penalty is assessed due to a Partner error, OnTheClock will reimburse the employer directly and invoice the Partner to recoup the amount.

This change ensures faster resolution and prevents additional interest from accruing while waiting for payment processing.

How employers remit penalty and interest

Tax notices typically include clear instructions for the fastest way to remit payment. The payment method can vary by agency and may include:

  • Submitting payment through an online tax portal
  • Mailing a paper check to the agency

The goal of these notices is to make it straightforward for employers to resolve outstanding balances and return to good standing as quickly as possible.