Understanding the Payroll Tax Deposits and Tax Payments

Knowing the tax deposit schedules

There are two deposit schedules available, one is monthly and another is semiweekly. These schedules let the employers know when to deposit the taxes. The tax liability of an employer is based on the dates in which they pay their employees.

Employers must determine their deposit schedule to make timely tax deposits. The deposit schedule that the employers use must be based on the total tax liability that was reported on Form 941 during a lookback period. This deposit schedule isn’t determined by the frequency of payments made to employees.

This deposit schedule isn’t applicable to the FUTA tax.

What is the Lookback Period?

The lookback period is a time frame that employers use to know their deposit schedule. This lookback period depends upon the form (either Form 941 or Form 944) which the employer uses to report their tax liability.

Lookback Period for Form 941

If you are a Form 941 filer, then the deposit schedule is determined by the total taxes reported on Form 941 line in a 4 quarter lookback period. This lookback period actually begins from July 1st and ends on June 30.

If the taxes reported were $50,000 or less for the lookback period, then you are considered as a monthly schedule depositor and if the reported amount is more than $50,000 then you are considered as a semiweekly schedule depositor.

If you are a Form 944 filer for the current year or either of the preceding 2 years, then the deposit schedule for a calendar year is determined from the total taxes reported during the second preceding calendar year.

Deposit Period

Deposit period for monthly schedule depositors is a calendar month and for the semiweekly schedule depositors, the deposit period is Wednesday through Friday and Saturday through Tuesday.

When to deposit payroll taxes withheld?

Monthly Deposit Schedule

For a calendar year and the total taxes on Form 941 line, 12 for the 4 quarters in the lookback period was $50,000 or less, then the employer is considered as a monthly schedule depositor.

Under the monthly deposit schedule, the taxes for the payments made during a month should be paid by the 15th day of the following month.

Semi-Weekly Deposit Schedule

For a calendar year if the total taxes on Form 941 line 12 in the lookback period were more than $50,000, then the employer is considered as a semiweekly schedule depositor.

Under the semiweekly deposit schedule, the taxes for the payments made on Wednesday, Thursday, and Friday are due by the following Wednesday, and the taxes for the payments made on Saturday, Sunday, Monday, and Tuesday are due by the following Friday.

$100,000 Next-Day Deposit Rule

If the employer accumulates $100,000 or more in tax on any day during their deposit period either the monthly or semiweekly deposit schedule, then taxes must be paid by the next business day irrespective of the deposit schedule.

If an employer is a monthly schedule depositor accumulating $100,000 tax liability on any day during the deposit period, then the employer will be considering a semiweekly schedule depositor on the next day.

Depositing FUTA Taxes

In order to make deposits for FUTA taxes on time, the employer has to figure out the FUTA taxes for the quarter and determine their liability. If the FUTA tax is less than $500, the employer can carry forward it to the next quarter liability and to see if the deposit can be made. FUTA tax is required to pay only when the liability reaches $500 or more for any quarter.

Federal Unemployment Tax Act (FUTA) taxes have to be deposited by the last day of the month following the end of the quarter.

How to Deposit taxes?

Employers must deposit all the payroll taxes through Electronics Funds Transfer (EFT). All the tax payments under EFT are made using the EFTPS (Electronic Federal Tax Payment System). EFTPS is a secure and free service provided by the Department of the Treasury.

For any federal tax deposits made using EFTPS, the taxes should be deposited by 8 p.m Eastern Time the day before the actual due date of the tax payment.

Same-day wire payment option

This might require some additional cost in the usage of the service and the employer has to arrange a financial institution that handles these electronic deposits on their behalf.