Determining your federal tax deposit schedule is essential for taxpayers, especially employers, responsible for withholding and depositing payroll taxes. This process affects how often you must deposit these taxes with the Internal Revenue Service (IRS). Below, we’ll walk you through how to determine your deposit schedule and ensure you're following tax laws.
Step 1: Obtain your Employer Identification Number (EIN)
Start by making sure you have your Employer Identification Number (EIN), a unique identifier the IRS assigns to your small business. This number is necessary for completing any federal tax form, including payroll tax filings, state income tax, and personal income tax obligations.
Step 2: Review Your Previous Year's Payroll Tax Liability
Look back at your previous tax year to calculate your total federal income tax, Social Security tax, Medicare tax, and any business taxes withheld from employee wages. This includes the total taxable income for your business, factoring in earned income for all employees. You can find this information in your payroll records or by consulting with your payroll provider or accountant. If your estimated tax payments were less than expected, this could impact your tax return.
Step 3: Compare Your Total Tax Liability
Once you have your total tax liability, compare it against IRS deposit thresholds:
Monthly Deposit Schedule: If your total tax liability for the previous tax year was $50,000 or less, you’ll need to follow the Monthly Deposit Schedule. Taxes are due by the 15th day of the following month.
Semiweekly Deposit Schedule: If your total tax liability exceeded $50,000, you must follow the Semiweekly Deposit Schedule. Taxes are due either on Wednesdays or Fridays, depending on your business's payroll schedule.
Next-Day Deposit Schedule: If your tax liability exceeds $100,000 on any given day, you must deposit the taxes the next banking day.
Step 4: Confirm with the IRS
To confirm your deposit schedule, visit the IRS website at irs.gov and refer to the "Circular E, Employer's Tax Guide." This guide provides updated information on tax rates, exemptions, and deposit schedules for businesses and earners. Always ensure your business is in compliance with tax law to avoid penalties and the possibility of a tax penalty.
Other Considerations
When handling taxes for your small business, always keep in mind other factors such as capital gains, state income tax, personal income tax, and potential tax credit opportunities like the earned income tax credit. Proper tax preparation, including using tools like a tax calculator, will help reduce your tax due. Additionally, if your business faces financial difficulties, you can explore payment plans through the IRS or make tax payments via a bank account or credit card.
Filing Your Taxes
As tax payers, it’s important to review your filing status each tax year, whether you're filing a federal tax return, state income tax, or a business tax form like Form W-4. Ensuring your tax return is accurate by checking your adjusted gross income and taking the correct standard deduction will help reduce your tax bill or even result in a tax refund. Always file before the tax due date to avoid penalties, and consider using professional tax preparation services or online resources like irs.gov for assistance.
By following these steps, you’ll be better equipped to handle payroll taxes, file your federal tax return, and stay compliant with IRS regulations.