Rev. date: 07/2006
The tax liability on a Form 941
, Employer's Quarterly Federal Tax Return
, and Form 944
, Employer's Annual Federal Tax Return
, includes your employees' withheld Federal income tax, social security tax, and Medicare tax, and your share of social security and Medicare tax. If you are required to file Form 941 and you accumulate a liability for these taxes of less than $2,500 per quarter, you may submit payment of taxes due with your timely filed return. Similarly, if you are required to file Form 944 and you accumulate a liability for these taxes of less than $2,500 a year, you may submit payment of taxes due with your timely filed return. However, if you accumulate a liability for these taxes of $2,500 or more per quarter, and you are required to file Form 941, you generally must deposit your taxes periodically according to your deposit schedule (i.e., monthly or semiweekly). You generally must make tax deposits in the same manner if you are required to file the annual Form 944 and accumulate a liability of $2,500 or more per year. Some exceptions apply, as discussed below.
The federal income tax withheld and social security and Medicare taxes are added together on your Form 941 or 944. If you made advance earned income credit payments to employees, these payments are subtracted from your total taxes. Refer to Topic 754 for more information on the advance earned income credit. The resulting net tax is the amount of employment taxes you owe for the quarter (if you file Form 941) or the year (if you file Form 944).
Form 944, designed to reduce the burden on small employers, is an annual employment tax return to report social security, Medicare, and withheld federal income taxes. Employers who file Form 944 will file one Form 944 for the year instead of four quarterly Forms 941. Employers cannot file Form 944 unless they are notified by the IRS that they qualify to file this form. If you believe your yearly employment taxes will be $1,000.00 or less for the tax year (approximately annual wages of $4,000 or less), please contact us at 800–829–4933 to determine if you are eligible to file Form 944. You should continue to file Form 941 quarterly until you receive written notification from the IRS that your filing requirement has been changed to Form 944 for a particular year.
Even if an employer's employment tax liability exceeds the deminimis deposit amount of less than $2,500 per quarter (for Form 941 filers) or per year (for Form 944 filers), the employer can make a payment with the return if the employer is a monthly schedule depositor making a payment in accordance with the Accuracy of Deposits Rule (see Publication 15, section 11).
An additional exception applies to Form 944 filers. Even if a Form 944 filer owes employment tax of $2,500 or more for the year, it may pay the fourth quarter employment tax liability with the return if it is less than $2,500, as long as the employment taxes for the first, second, and third quarters were already deposited.
If you are required to deposit your employment taxes, you must deposit them according to one of two deposit schedules, monthly or semiweekly. Which schedule you use for the current calendar year is based on the amount of taxes you reported during the four quarters in your lookback period. For details on your lookback period refer to Chapter 11 of Publication 15, or if you are required to file Form 944, refer to the Instructions for Form 944
If you reported taxes of $50,000 or less during the lookback period, you are a monthly schedule depositor, and generally must deposit each month's accumulated employment taxes on or before the 15th day of the following month. For example, taxes for January must be deposited by February 15th.
If you reported taxes greater than $50,000 for the lookback period, you are a semiweekly schedule depositor, and generally must deposit your employment taxes on Wednesday or Friday, of each week, based on the following schedule:
- The employment taxes on payments made to your employees on Wednesday, Thursday, and/or Friday, must be deposited by the following Wednesday.
- The taxes on payments made to your employees on Saturday, Sunday, Monday, and/or Tuesday, must be deposited by the following Friday.
Semiweekly depositors always have at least 3 banking days to make a deposit. If any of the 3 weekdays after the end of the semiweekly period is a holiday on which banks are closed, you have one additional day to deposit.
Regardless of whether you are a monthly 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 them on the next banking day. If this happens, you become a semiweekly depositor for the remainder of the calendar year and for the following calendar year.
If any deposit due date falls on a Saturday, Sunday, or legal holiday, the deposit will be considered timely if made by the next banking day.
If you are a new employer, your taxes in the lookback period are considered to be zero for any quarter your business did not exist. Therefore, in the first year of business you are a monthly schedule depositor unless the $100,000 next day deposit rule applies.
Deposits are made either by using the Electronic Federal Tax Payment System (EFTPS), or by making payment to an authorized financial institution with a Form 8109, Federal Tax Deposit Coupon. If you use Form 8109, it is very important that it show the correct employer identification number, name, and type of tax and tax period, as this information is used by the IRS to credit your account. Your check or money order should be made payable to the financial institution where you make your deposit, not to the IRS. There are penalties for depositing late, or for mailing payments directly to the IRS that are required to be deposited, unless you have reasonable cause for doing so.
You must make deposits using EFTPS for all depository tax liabilities for the current year if you made more than $200,000 in aggregate deposits for all types of Federal depository taxes in the year two years before the current year or if you were required to make electronic deposits in the previous year.
If you are required to make electronic deposits through EFTPS and fail to do so, or make your deposit using a paper coupon Form 8109, you may be subject to a 10% penalty. Refer to Section 11 in Publication 15
for rules on depositing taxes.
Even if you do not have to make electronic deposits, you may voluntarily participate in EFTPS. To enroll in EFTPS, call 800–555–4477, or to enroll online, visit www.eftps.gov. For general information about EFTPS, call 800–829–1040 for individuals or 800–829–4933 for businesses.
Refer to Publication 966
for Electronic Federal Tax Payment System information and Publication 15
, (Circular E), Employer's Tax Guide
, for deposit requirements.