In what situation does an employer not incur a penalty under the safe harbor rule?

The correct situation in which an employer does not incur a penalty under the safe harbor rule occurs when the shortfall is less than $200. The safe harbor rule is designed to provide relief to employers who may underpay their employment tax liabilities under specific circumstances. If an employer's shortfall is below this threshold, it is considered negligible, and therefore the employer is exempt from penalties. This provision allows employers to avoid the administrative burden and potential financial penalties that could arise from minor discrepancies in their tax payments.

When the shortfall exceeds the $200 threshold, as indicated in other options, the employer may become liable for penalties because the underpayment is deemed significant enough to warrant correction. Similarly, scenarios involving late deposits also lead to potential penalties, reinforcing the idea that timely and accurate payments are critical for compliance. Consequently, the threshold set at $200 serves as an important measure for determining when penalties will apply, thereby providing a degree of leniency for smaller, inadvertent errors in tax payments.