As an employer, you are generally required to deposit employment taxes reported on Form 941 (Employer's Quarterly Federal Tax Return) or Form 944 (Employer's Annual Federal Tax Return). Both forms include:
Federal income tax withheld from employees’ wages
The employer and employee shares of Social Security and Medicare taxes
The deposit schedule you must follow—either monthly or semiweekly—depends on the amount of taxes you previously reported during your lookback period. These schedules dictate when you need to deposit the taxes, based on the date wages are paid (cash basis), rather than when the tax liabilities are accrued.
Deposit Requirements Based on Liability
1. Liability Under $2,500:
If you are a Form 941 filer and your tax liability for the current or preceding quarter is less than $2,500, you may pay the taxes with your timely filed return instead of making separate deposits—provided you don’t incur a $100,000 next-day deposit obligation during the quarter.
Similarly, Form 944 filers with an annual tax liability below $2,500 can pay the taxes with their return rather than making deposits.
If you’re filing Form 944 and your fourth-quarter liability is under $2,500, you can pay it with your return as long as you properly deposited taxes for the first three quarters.
2. Liability of $2,500 or More:
If your total employment tax liability is $2,500 or higher, you must deposit taxes on a monthly or semiweekly schedule, unless you qualify to pay with your return.
If you are unsure whether your current quarter liability will be under $2,500 and the prior quarter liability wasn’t below this threshold, you should follow the monthly or semiweekly rules to avoid penalties.
Deposit Schedules: Monthly vs. Semiweekly
You are required to follow one of two deposit schedules:
Monthly Schedule Depositor: For businesses that reported $50,000 or less in employment taxes during the lookback period.
Semiweekly Schedule Depositor: For businesses that reported more than $50,000 in taxes during the lookback period.
✅ Monthly Schedule Depositors:
You must deposit taxes on wages paid during a month by the 15th of the following month.
For example, taxes on January wages are due by February 15.
If the 15th falls on a weekend or legal holiday in the District of Columbia, you have until the next business day to make the deposit.
✅ Semiweekly Schedule Depositors:
The deposit deadlines are based on your payday:
Wages paid on Wednesday, Thursday, or Friday → Deposit taxes by the following Wednesday.
Wages paid on Saturday, Sunday, Monday, or Tuesday → Deposit taxes by the following Friday.
If a deposit due date falls on a non-business day, it is considered timely if made by the next business day.
Semiweekly depositors have at least three business days to make the required deposit after the close of their semiweekly period.
The $100,000 Next-Day Deposit Rule
Regardless of your regular deposit schedule, if you accumulate $100,000 or more in employment taxes on any day during a deposit period, you must deposit the taxes by the next business day.
Once this rule applies, you become a semiweekly depositor for the remainder of the calendar year and for the entire following year, even if your future liabilities are lower.
Deposit Rules for New Employers
If you are a new employer, your employment tax liability for any quarter before you started or acquired your business is considered zero.
As a result, you are automatically classified as a monthly schedule depositor in your first year, unless the $100,000 next-day deposit rule applies.
How to Make Deposits
All federal tax deposits must be made electronically using Electronic Funds Transfer (EFT). You can do this through:
IRS Direct Pay (for businesses)
EFTPS (Electronic Federal Tax Payment System) – a free service provided by the U.S. Department of the Treasury
Your IRS business tax account
A third-party provider (such as your payroll service or financial institution)
✅ Important Deposit Timing Rules:
To be considered on time, deposits must be scheduled by 8 p.m. Eastern Time the day before the due date.
If you miss this deadline, you can still make a same-day deposit through the Federal Tax Collection Service (FTCS), but this requires prior arrangement with your financial institution.
Check with your financial institution regarding availability, deadlines, and any associated fees.
Penalties for Late or Incorrect Deposits
Failing to deposit employment taxes properly can result in penalties, which vary based on the delay:
2% penalty: Deposits made 1-5 days late.
5% penalty: Deposits made 6-15 days late.
10% penalty: Deposits made 16+ days late or made directly to the IRS instead of through EFTPS.
15% penalty: Deposits made more than 10 days after receiving an IRS notice or demand for payment.
The IRS may waive penalties in certain cases, such as reasonable cause or first-time noncompliance. For details, consult Publication 15 (Circular E), Section 11.
Key Takeaway
Employers must follow the correct deposit schedule—monthly or semiweekly—based on their lookback period liability. Accurate and timely deposits are essential to avoid penalties.
Monthly depositors: Taxes are due by the 15th of the following month.
Semiweekly depositors: Deposit deadlines depend on the payday.
$100,000 rule: Large liabilities must be deposited by the next business day.
Use EFTPS or IRS-approved payment services to ensure your deposits are made securely and on time.