How to Deposit Employment Taxes

Generally, you must deposit employment taxes (i.e. federal income tax withheld, social security, and Medicare taxes) including Form 945 taxes by electronic funds transfer. However, there is an exception that allows you to pay employment taxes with your return (Form 941 or Form 944) instead of being deposited

Payment with Return

You may make a payment with Form 941 or Form 944 instead of depositing, without incurring a penalty, if one of the following applies:

  • Your Form 941 total tax liability for either the current quarter or the preceding quarter is less than $2,500, and you did not incur a $100,000 next-day deposit obligation during the current quarter.
  • If you're not sure your total tax liability for the current quarter will be less than $2,500, (and your liability for the preceding quarter was not less than $2,500), make deposits using the semi-weekly or monthly rules so you won't be subject to failure-to-deposit penalties.
  • You're a monthly schedule depositor (defined below) and make a payment in accordance with the Accuracy of Deposits Rule discussed later in this section. This payment may be $2,500 or more.

Employers who have been notified to file Form 944 can pay their fourth quarter tax liability with Form 944 if the fourth quarter tax liability is less than $2,500. Employers must have deposited any tax liability due for the first, second, and third quarters according to the deposit rules to avoid failure-to-deposit penalties for deposits during those quarters.

Electronic Deposit Requirement

You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax).

Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make deposits on your behalf.

If you fail to make a timely deposit, you may be subject to a 10% failure-to-deposit penalty.

Electronic Federal Tax Payment System (EFTPS)

  • EFTPS is a free service provided by the Department of the Treasury.
  • If you are not required to use EFTPS you may participate voluntarily.
  • Call 1-800-555-4477 or visit: www.eftps.gov
  • Generally, large employers are required to use EFTPS for all depository taxes such as:
    • Employment taxes
    • Excise taxes
    • Corporate income taxes

Additional information about EFTPS is also available in Publication 966

Using a Payroll Service (recommended)

  • If you use a payroll service to process your payroll, you may authorize them to also pay your employment taxes.
  • Special enrollment rules for the IRS Electronic Federal Tax Payment System (EFTPS) may apply.
    • Tip: If you enroll yourself to use the IRS Electronic Federal Tax Payment System separately from the payroll service, you'll have the flexibility of being able to make your own electronic payments.

File your personal and small business taxes (Schedule C)