Editorial · October 12, 2024
Payroll Tax Deposits: Monthly vs Semiweekly Schedules
Payroll tax deposits are due on a schedule the IRS sets for you, and the schedule depends on how much tax you reported in the past. If your lookback total is $50,000 or less, you deposit monthly. If it is more than $50,000, you deposit semiweekly. Late deposits trigger penalties of 2 to 15 percent, so it pays to know which schedule you are on.
What payroll tax deposits are
Each time you pay wages, you owe federal employment taxes. They include the income tax you withhold from pay, the employee share of Social Security and Medicare, and the matching employer share. You do not send this money with each paycheck. You deposit it with the government on a set timetable, and you report it later on Form 941.
The IRS calls the withheld portion trust fund taxes. Your workers trust you to pass that money on to the U.S. Treasury. That is why the rules on timing are strict.
How the lookback period picks your schedule
The IRS looks back at a fixed window of time. For a Form 941 filer, the lookback period is four quarters. It starts July 1 and ends June 30. For calendar year 2024, the window ran from July 1, 2022, through June 30, 2023.
Add up the total tax you reported on line 12 of Form 941 for those four quarters. That one number decides your schedule for the whole year. Your current payroll does not change it. If you grow fast in 2024, you stay on the same schedule until the next lookback window applies.
A new employer has a simple start. Any quarter before you began or bought the business counts as zero. So a new employer is a monthly depositor.
The monthly schedule
A monthly depositor deposits the taxes from wages paid in one month by the 15th day of the next month. Wages paid in March, for example, are due by April 15. If that day falls on a weekend or legal holiday, the deposit is due on the next business day.
Monthly depositors should not file Form 941 every month. You still file it once each quarter. The monthly part applies only to the deposits.
The semiweekly schedule
The name can mislead. Semiweekly does not mean two deposits a week. It means the timing depends on the day you pay your workers, and there are two deposit periods in each week.
- Pay days on Wednesday, Thursday or Friday: deposit by the following Wednesday.
- Pay days on Saturday, Sunday, Monday or Tuesday: deposit by the following Friday.
If you pay on a Friday, for example, the money is due the next Wednesday. A semiweekly depositor also completes Schedule B of Form 941, which lists the tax owed for each day of the quarter.
There is one rule that overrides both schedules. If you build up $100,000 or more in tax on any single day, you must deposit it by the next business day. This applies to monthly and semiweekly depositors alike.
How to make a deposit
Federal tax deposits must be made by electronic funds transfer. Most employers use the Electronic Federal Tax Payment System, known as EFTPS. You can also have a payroll service, bank or tax professional deposit for you.
Mind the cutoff. A deposit made through EFTPS counts as on time only if you submit it by 8 p.m. Eastern time the day before the due date. A third party may set an earlier cutoff. If you miss the EFTPS window, the IRS offers a same-day wire option.
The IRS also forgives small errors if you fix them quickly. A shortfall that is no more than the greater of $100 or 2 percent of the amount due draws no penalty, as long as you make it up by the IRS makeup date.
What happens when a deposit is late
The failure-to-deposit penalty grows with each day. The IRS counts calendar days from the due date.
- 2 percent if the deposit is 1 to 5 days late.
- 5 percent if it is 6 to 15 days late.
- 10 percent if it is 16 or more days late.
- 15 percent if it is still unpaid more than 10 days after the first IRS notice.
A deposit sent straight to the IRS with a return, rather than deposited, can draw a 10 percent penalty too, with some exceptions. The most serious risk is the trust fund recovery penalty. It equals 100 percent of the unpaid trust fund tax. The IRS can apply it to any responsible person who willfully fails to pay the tax over, and not only to the business.
A simple habit helps. Put each due date on a calendar as soon as you run payroll. If cash is tight, call your payroll provider or tax professional before the date passes, not after.
Quick checklist
- Find your lookback total on Form 941, line 12, for the four quarters ending June 30.
- $50,000 or less means monthly. More than $50,000 means semiweekly.
- Deposit by EFT, and beat the 8 p.m. Eastern cutoff the day before.
- Watch for the $100,000 next-day rule.
- Still file Form 941 each quarter, due April 30, July 31, October 31 and January 31.
This article is general information only. For payroll tax decisions, confirm your deposit schedule with a CPA, an enrolled agent or the IRS.