The Internal Revenue Service has very specific rules for when payroll taxes must be deposited. This schedule is determined by the amount of tax reported on form 941 during the 4 quarter lookback period. The dates of the lookback period are July1 to June 30. For instance, the lookback period for 2013 was July 1, 2011-June 30, 2012. If you reported over $50,000 in payroll taxes, the deposit schedule is semi-weekly, $50,000 or less is a monthly deposit schedule.
For employers on a monthly deposit schedule, taxes are due on the 15th of the month following the month the liability was incurred. January liability is due February 15, February liability due March 15, etc. If the 15th falls on a weekend or bank holiday, the deposit is due the next business day. There is an exception to this rule, however. If you are an employer who accrues less than $2500 tax liability in the quarter, taxes may be remitted by the last day of the month following the quarter end. For instance, for the first quarter ending March 31, the tax is due April 30.
Under the semiweekly deposit schedule, deposit employment taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Deposit taxes for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. Semiweekly schedule depositors must complete Schedule B (Form 941), Report of Tax Liability for Semiweekly Schedule Depositors, and submit it with Form 941. This allows the IRS to see if all deposits were made timely as it shows the day the liability was incurred. If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the liabilities.
If you accumulate $100,000 or more in taxes on any day during a monthly or semiweekly deposit period, you must deposit the tax by the next business day, whether you are a monthly or semiweekly schedule depositor.
You must deposit employment taxes, by electronic funds transfer. If you fail to make a timely deposit, you may be subject to a 10% failure-to-deposit penalty. Penalties may apply if you do not make required deposits on time or if you make deposits for less than the required amount. The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect.
For amounts not properly or timely deposited, the penalty rates are as follows:
- 2% – deposits made 1-5 days late
- 5% – deposits made 6-15 days late
- 10% – deposits made 16 or more days late
- 10% – deposits made directly to the IRS with payroll return
- 15% – amounts still unpaid more than 10 days after the date of the first notice the IRS sent asking for the tax due.
Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability.
If you are unsure of how much to pay, or your deposit schedule, contact us at 310-534-5577 or [email protected].
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