A federal deposit schedule, also known as a Federal Tax Deposit Schedule, is a timetable established by the Internal Revenue Service (IRS) to help businesses stay on top of their employment taxes and meet their tax liability obligations. These schedules dictate when taxpayers need to make payroll tax deposits for various federal payroll taxes, such as federal income tax (FIT), FICA taxes (Social Security and Medicare), and FUTA tax (Federal Unemployment Tax).
The deposit schedule you follow depends on the size of your small business and your total tax liability during the lookback period. Generally, there are two main deposit schedules:
Monthly Deposit Schedule: This applies to new employers and filers with a smaller tax liability. Businesses using this schedule must make their payroll tax deposits by the 15th of the following month after the taxes are withheld. The due date for the deposit is crucial to avoid penalties.
Semi-Weekly Deposit Schedule: This schedule is for businesses with a larger employment tax liability. Semi-weekly depositors must deposit their employment taxes based on their pay day. If the pay day is on Wednesday, Thursday, or Friday, the deposit is due by the following Wednesday. If the pay day is on Saturday, Sunday, Monday, or Tuesday, the deposit is due by the following Friday.
When deposit due dates land on a legal holiday, the due date is extended to the next business day. Following the correct semi-weekly deposit schedule helps businesses avoid fines.
The IRS determines your deposit schedule based on your tax filing history, particularly your employment tax liability from prior years. This is calculated using the lookback period, which assesses how much federal payroll taxes you owed in the past. New employers automatically start with the monthly schedule until they accumulate a tax history.
All payroll tax deposits must be made using the Electronic Federal Tax Payment System (EFTPS). This e-file method is a secure, convenient way to meet the IRS's deposit requirements. Providers of payroll service, like FarmRaise, also use EFTPS to ensure that employee wages and federal income tax withholdings are submitted on time.
Filers of IRS Form 943, which is the annual federal tax return for agricultural employees, follow specific deposit rules as well. They must report and pay taxes for their agricultural workers by filing the tax return annually.
In addition to regular federal payroll taxes, businesses are responsible for paying FUTA tax, which is a federal unemployment tax. FUTA funds federal unemployment compensation programs and is reported on IRS Form 940. It’s essential for businesses to stay compliant with both their regular employment taxes and FUTA tax to avoid penalties and interest.
Understanding your deposit requirements and staying current with tax forms like Form 940 and 943 is essential to managing your business’s tax liability. Ensuring all tax withholding amounts are deposited accurately and on time keeps your business in good standing with the IRS. For those using a payroll service, it’s important to verify that your tax return filings and electronic federal tax payments are being handled correctly according to your deposit rule schedule.
By following the appropriate federal deposit schedule, using the EFTPS, and filing the correct tax forms, you can efficiently manage your business’s federal payroll taxes and avoid penalties related to missed deposit due dates.