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. The Federal income tax withheld and social security and Medicare taxes are added together on your Form 941 or 944 for purposes of determining your deposit requirements. 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. If you made COBRA premium assistance payments during the period, these payments are subtracted from your total taxes. For more information on the COBRA premium subsidy, visit the IRS website at www.irs.gov and enter the key word COBRA. 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) that determines your deposit requirements.
The Hiring Incentives to Restore Employment (HIRE) Act, signed into law March 18, 2010, created two new tax benefits that are available to employers who hire certain "qualified employees" in their trade or business. For additional information about the new payroll tax exemption and retention credit created by The HIRE Act of 2010, see Frequently-Asked Questions
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.
Even if an employer's employment tax liability is $2,500 or more 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. For more information, refer to Chapter 11 of Publication 15
, (Circular E), Employer's Tax Guide
Furthermore, beginning January 2010, employers who file Form 941 will not have to make deposits during a quarter if their accumulated tax liability for either the current quarter or the prior quarter is less than $2,500 and they full pay the amount due with a timely filed return for the current quarter.
An additional exception applies to Form 944 filers. Even if a Form 944 filer's employment tax liability is $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 previously 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 (for 941 filers) or year (for 944 filers) in your lookback period. For details on lookback periods refer to Chapter 11 of Publication 15.
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 employment 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 Chapter 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.