Employment Tax Deposit Schedules
There are two deposit schedules, monthly and semiweekly, for determining when you deposit social security and Medicare Taxes and withheld federal income tax These taxes are reported quarterly to the IRS on Form 941 and are referred to as 941 taxes.
The purpose of these two schedules is to tell you when a deposit is due after a tax liability arises after a payday.
You must determine which of the two deposit schedules (monthly or semiweekly) to use before the beginning of each calendar year. The deposit schedule you must use is based on the total tax liability you reported during the lookback period on Form 941.
1.These rules do not apply to Federal Unemployment (FUTA) Tax.
2. How often you pay your employees or make deposits has no bearing on your deposit schedule.
How to Determine Your Employment Tax Deposit Schedule (Form 941)
The deposit schedule that you are required to use is based on the total tax liability that you reported on Form 941 during the lookback period, a 12-month period.
Three Steps to Determine Your Deposit Schedule
- Identify your look back period.
- Add the total taxes reported on Form 941 during the lookback period.
- Based on steps 1 and 2, determine if you are a monthly or semiweekly schedule depositor.
STEP 1: Identify your Form 941 lookback period.
The first step in figuring out whether you are a monthly or semiweekly depositor, is to identify your Form 941 lookback period. Form 941 is used to report social security and Medicare taxes and withheld federal income taxes.
The reason for the look back period is to enable the IRS to accurately see what your tax liability was for a full year.
How to identify your Form 941 lookback period:
The lookback period is the 12-month period ending on June 30th of the prior year. For example, for calendar year 2016, the twelve-month lookback period is: July 1, 2014 thru June 30, 2015.
For Calendar Year 2016, the Lookback Period is:
- July 1 thru Sept. 30, 2014 (3rd quarter 2014)
- Oct. 1, 2014 thru Dec 31, 2014 (4th quarter 2014)
- Jan. 1, 2015 thru Mar 31, 2015 (1st quarter 2015)
- Apr. 1, 2015 thru June 30,2015 (2nd quarter 2015)
STEP 2: Determine your total tax liability for the lookback period
Add up the total tax liability reported on each Form 941 included in the lookback period to determine the total liability for that one-year period.
STEP 3: Determine if you are a Monthly Schedule Depositor or Semiweekly Schedule Depositor.
Monthly Schedule Depositor
Your are a monthly schedule depositor if:
- Form 941 tax liabilities for the four quarters of the lookback period total $50,000 or less.
- If you are a new employer and had no employees during the lookback period, you are a monthly depositor.
- If all your taxes total $50,000 or less for the period, you are a monthly depositor.
When to Deposit Taxes:
- A monthly schedule depositor must deposit the employment tax liability for each month by the 15th of the following month.
- For example, July employment taxes are due
on or before August 15th.
- Note: If no wages are paid during any particular month, and therefore, there is no tax liability for that month, then no deposit would be required relative to that month. For example, if you didn't pay any wages to employees for the entire month of August, then no deposit would be required on Sept. 15 (the 15th of the following month). In other words, you follow the deposit schedule when wages are actually paid.
If the due date falls on a banking holiday, deposit by the next business day.
Semiweekly Schedule Depositor
You are a semiweekly schedule depositor if:
- Form 941 tax liabilities for the four quarters of the lookback period total more than $50,000.
When to deposit taxes:
- Deposit taxes from payrolls paid on Saturday, Sunday, Monday or Tuesday, by the following Friday.
- Deposit the taxes from payrolls paid on Wednesday, Thursday, or Friday by the following Wednesday.
Keep in mind, the terms "monthly schedule depositor" and "semiweekly schedule
depositor" identify which set of deposit rules you must follow when an employment tax
liability ARISES (monthly schedule depositor if total taxes are $50K or less during the lookback period or semiweekly schedule depositor if total taxes are over $50K during the lookback period).
The question is, when does the tax liability arise?
The tax liability arises (is triggered) on the DATES wages are actually PAID (the payment days) and NOT when employment tax liabilities are ACCRUED. If wages are paid only once a month, taxes are deposited only once a month according to the deposit schedule.
For example, say you pay your employees once a month, on the last Friday of the monthly payroll period. You pay your employees their monthly wages on Friday, April 28, 2017. As a semiweekly schedule depositor you would make a deposit on the following Wednesday, May 3, 2017 because the tax liability for the month's wages paid on Friday must be deposited the following Wednesday for semiweekly schedule depositors.
If the deposit due date falls on a banking holiday, make the deposit on the next business day.
Example of Monthly and Semiweekly Schedules
Janet Paycheck reported Form 941 tax liabilities as follows for 2015 and 2016 lookback periods:
2015 Lookback Period:
- 3rd Quarter 2013: $12,000
- 4th Quarter 2013: $12,000
- 1st Quarter 2014: $12,000
- 2nd Quarter 2014: $12,000
- TOTAL: $48,000
For 2015, Janet is a monthly schedule depositor. Her tax liability for the four quarters in the lookback period was not more than $50,000.
2016 Lookback Period:
- 3rd Quarter 2014: $12,000
- 4th Quarter 2014: $12,000
- 1st Quarter 2015: $12,000
- 2nd Quarter 2015: $15,000
- TOTAL: $51,000
For 2016, Janet is a semiweekly schedule depositor. Her tax liability for the four quarters in the lookback period was more than $50,000.
Deposit Rule for Payroll Taxes of $100,000
- If your payroll tax reaches $100,000, deposit the funds within one banking day, and
- For the rest of the year use the semiweekly schedule for all deposits under $100,000.
How to Correct a Form 941 Reporting Error
If you discover that you made a mistake on Form 941 in reporting your tax liability, use Form 941-X: Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund to correct it.
Accuracy in Deposit Rule
You are required to deposit 100% of your tax liability on or before the deposit due date. However, penalties won't be applied for depositing less than 100% if both of the following conditions area met:
- Any deposit shortfall doesn't exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited.
- The deposit shortfall is paid or deposited by the shortfall makeup date (described next).
Makeup Date for Deposit Shortfall
Monthly schedule depositor:
Deposit or pay the shortfall with your return by the due date of the return. You may pay the shortfall with your return even if the amount is $2,500 or more.
Semiweekly schedule depositor:
Deposit by the earlier of:
- The first Wednesday or Friday that falls on or after the 15th of the month following the month in which the shortfall occurred, or
- The due date of your return (for the return period of the tax liability). Form 941, Form 943, Form 944, and Form 945 are due by the last day of the month following the period for which the returns were made. Form CT-1 is due by the last day of the second month following the calendar year.
If a semiweekly schedule depositor has a deposit shortfall during June 2016, the shortfall makeup date is July 15, 2016 (Friday). The 15th of the month following the month which the shortfall occurred.
However, if the shortfall occurred on the required April 1 (Friday) deposit due date for the March 29 (Tuesday) pay date, the return due date for the March 29 pay date (May 2) would come before the May 18 (Wednesday) shortfall makeup date. In this case, the shortfall must be deposited by May 2.
For Freelancers and independent Contractors
- Organize your financial data into one central accounting system on the cloud
- Software kept up to date.
- Your data kept secure
- Anytime, anywhere data access.
- Pay your quarterly estimated taxes online.
- Export Schedule C to TurboTax at year-end for faster filing.
- Save up to 50% off QuickBooks Self-Employed. Track every deduction! Start your free trial now!
Have an accounting or bookkeeping question? Email it to me.
- Return to the Payroll Taxes Table of Contents to find related links.