Form 941 and 944 – Deposit Requirements

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 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 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, and you did not incur a $100,000 next-day deposit obligation during the current 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 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.

Even if your employment tax liability is $2,500 or more per quarter (for Form 941 filers) or per year (for Form 944 filers), you can make a payment with the return if you are a monthly schedule depositor making a payment in accordance with the Accuracy of Deposits Rule.

Furthermore, if you are a Form 941 filer, you do not have to make deposits during a quarter if your accumulated tax liability for either the current quarter or the prior quarter is less than $2,500 and you full pay the amount due with a timely filed return for the current quarter.

An additional exception applies to Form 944 filers. If you are a Form 944 filer and your employment tax liability is $2,500 or more for the year, you 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, (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 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 based on the following schedule:

1. The employment taxes on payments made to your employees on Wednesday, Thursday, and/or Friday, must be deposited by the following Wednesday.
2. The employment taxes on payments made to your employees on Saturday, Sunday, Monday, and/or Tuesday, must be deposited by the following Friday.

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 will have a next day deposit requirement. If this happens, you become a semiweekly depositor for 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, (Circular E), Employer's Tax Guide.

No deposits are due on a Saturday, Sunday, or legal holiday.

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.

Beginning in 2011, the Financial Management Service (FMS), a Bureau of the Treasury Department, is eliminating the system that enabled the processing of Federal Tax Deposit Coupons (Form 8109). Accordingly, beginning January 1, 2011, all deposits must be made using the Electronic Federal Tax Payment System (EFTPS).

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.

Employers below the $2,500 threshold may remit the employment taxes with their Form 941 or Form 944, may voluntarily make deposits by EFTPS, or may use other methods of payment as provided by the instructions relating to the return

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 more information on deposit rules.