Generally, employers are required to deposit the employment taxes reported on Forms 941 (PDF), Employer’s QUARTERLY Federal Tax Return, or Form 944 (PDF), Employer’s ANNUAL Federal Tax Return. Both forms report federal income tax withheld from your employees, along with the employer and employee shares of Social Security and Medicare tax. The amount of employment taxes you reported on your Forms 941 or 944 determines which deposit schedule you must use, monthly or semiweekly. For the rules on filing requirements, refer to Topic 758.
Liability under $2,500: If you are required to file Form 941 and your employment tax liability for the preceding quarter or current quarter is less than $2,500, you may pay the taxes for the current quarter with your timely filed return instead of making deposits, provided you do not incur a $100,000 next-day deposit obligation during the current quarter.
Similarly, if you are required to file Form 944 and your employment tax liability for the year is less than $2,500, you may pay the taxes for the year with your timely filed return instead of making deposits. If you are required to file Form 944 and your employment tax liability for the fourth quarter is less than $2,500, you may pay your fourth quarter liability with your timely filed return, as long as you have made deposits for the first, second, and third quarters according to the applicable deposit rules. Employers below the $2,500 threshold, who are not required to make deposits and instead remit employment taxes with their Forms 941 or Form 944, may choose to deposit the taxes, or use other methods of payment as provided by the form instructions.
Liability of $2,500 or more: Unless you are eligible to make payments with your return, you must deposit your taxes. If you are a Form 941 filer and you are not sure your total tax liability for the current quarter will be less than $2,500, (and your liability for the preceding quarter was not less than $2,500), make deposits using the semiweekly or monthly rules so you won’t be subject to failure-to-deposit penalties.
You must make deposits according to one of two deposit schedules, monthly or semiweekly. The schedule you use for the current calendar year depends on the amount of taxes you reported during your lookback period. If you have filed only Form 941, the lookback period is 12 months, covering four quarters ending on June 30th of the prior year. If you filed Form 944 in either of the two previous years or you are filing Form 944 in the current year, the lookback period is the second prior calendar year. If you reported $50,000 or less of taxes for the lookback period, you are a monthly schedule depositor; if you reported more than $50,000, you are a semiweekly schedule depositor. For more information on lookback periods, refer to Chapter 11 of Publication 15, (Circular E), Employer’s Tax Guide.
If you reported taxes of $50,000 or less during the lookback period, you are a monthly schedule depositor, and you generally must deposit your employment taxes on payments made during a given month on or before the 15th day of the following month. For example, you must deposit taxes on payments made in January by February 15. If the 15th of any calendar month falls on a Saturday, Sunday or legal holiday, the deposit is due by the next banking day.
If you reported taxes of more than $50,000 for the lookback period, you are a semiweekly schedule depositor, and you generally must deposit your employment taxes based on the following schedule:
- If your payday is on Wednesday, Thursday, and/or Friday, you must deposit these taxes by the following Wednesday.
- If your payday is on Saturday, Sunday, Monday, and/or Tuesday, you must deposit these taxes by the following Friday.
If you are required to make a deposit on a day that is not a business day, the deposit is considered timely if you make it by the close of the next business day. A business day is any day other than a Saturday, Sunday or legal holiday. For example, if you are required to make a deposit on a Friday and Friday is a legal holiday, the deposit will be considered timely if you make it by the following Monday (if that Monday is a business day). The term legal holiday means any legal holiday in the District of Columbia. (See Chapter 11 of Publication 15). A statewide legal holiday, other than those listed, does not delay the due date of federal tax deposits. Semiweekly schedule depositors have at least 3 business days to make a deposit. If any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the required deposit.
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Regardless of whether you are a monthly schedule depositor or a semiweekly schedule depositor, if you accumulate taxes of $100,000 or more on any day during a deposit period, you must deposit the tax by the next business day after you accumulate $100,000. If this happens, you become a semiweekly depositor for at least the remainder of the calendar year and for the following calendar year. For details on the $100,000 Next-Day Deposit Rule, see Publication 15.
If you are a new employer, your taxes in the lookback period are considered to be zero for any quarter before you started or acquired your business. Therefore, in the first year of business you are a monthly schedule depositor unless the $100,000 next-day deposit rule applies.
You must make all federal tax deposits using electronic funds transfer. Generally, you make electronic funds transfers by using the Electronic Federal Tax Payment System (EFTPS). If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make your deposits on your behalf. EFTPS is a free service provided by the Department of Treasury. Services provided by a third party may have a fee. For your EFTPS deposit to be on time, you must initiate the deposit by 8 p.m. Eastern Standard Time the day before the date the deposit is due. To enroll in EFTPS, call 800-555-4477 or visit EFTPS.gov. You may also find additional information in Publication 966 (PDF), Electronic Federal Tax Payment System, A Guide to Getting Started.
If you fail to initiate a deposit transaction on EFTPS by 8 p.m. Eastern Standard Time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA) for a same-day payment. If you anticipate that you will ever need to use the same-day payment method, be sure to arrange this ahead of time with your financial institution. Please check with your financial institution regarding availability, deadlines, and costs. Your financial institution may charge you a fee for payments made this way. To learn more about the information you will need to provide to your financial institution to make a same-day payment, visit EFTPS.gov to download the Same-Day Payment Worksheet.
You are required to deposit 100% of your tax liability on or before the deposit due date. Penalties may apply for depositing late, depositing less than the required amount, or for mailing payments directly to the IRS instead of depositing the amounts. The IRS may waive penalties in certain cases. See Publication 15, for more information on accuracy of deposit rules and penalties.
For detailed information, see Publication 3151-A (PDF), The ABCs of FTDs: Resource Guide for Understanding Federal Tax Deposits.
Source: IRS Web Site http://www.irs.gov/taxtopics/tc757.html