Forms 941 and 944 – Deposit Requirements

The tax liability on Forms 941, Employer’s QUARTERLY Federal Tax Return, and Form 944 (PDF), Employer’s ANNUAL Federal Tax Return, includes your employees’ withheld federal income tax, social security tax, and Medicare tax (collectively “employment taxes”). Employment taxes are added together on your Forms 941 or 944 for purposes of determining your deposit requirements. For the rules on filing requirements, refer to Topic 758.

Liability under $2,500: If you are required to file Form 941 and you accumulate a liability for these taxes of less than $2,500 per quarter, you may submit payment of taxes due with your timely filed return.

Similarly, if you are required to file Form 944 and you accumulate a liability for these taxes of less than $2,500 a year, you may submit payment of taxes due with your timely filed return.

Liability over $2,500: If you accumulate a liability for these taxes of $2,500 or more per quarter, and you are required to file Forms 941, you must deposit your taxes according to your deposit schedule (i.e., monthly or semiweekly). You must make tax deposits in the same manner if you are required to file the annual Form 944 and accumulate a liability of $2,500 or more per year.

Even if your employment tax liability is $2,500 or more per quarter (for Form 941 filers) or per year (for Form 944 filers), you can make a payment with the return if you are a monthly schedule depositor making a payment in accordance with the Accuracy of Deposits Rule found in Publication 15, (Circular E), Employer’s Tax Guide.

Furthermore, if you are a Form 941 filer, you can full pay the amount due with a timely filed return for the current quarter instead of depositing, without incurring a penalty, if your accumulated tax liability for the prior quarter is less than $2,500 and you did not incur a $100,000 next-day deposit obligation during the current quarter.

In addition, if you file Form 944, and your total Form 944 tax liability is $2,500 or more for the calendar year, but less than $2,500 for the quarter, you can deposit by the last day of the month after the end of the quarter. If you are a Form 944 filer and your employment tax liability is $2,500 or more for the calendar year, you may pay the fourth quarter employment tax liability with the return if it is less than $2,500. You 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.

If you made COBRA premium assistance payments, you may reduce your payroll tax deposits during the period by the amount of COBRA subsidy provided in the period. These payments are treated as having been deposited on the first day of the period and applied against the employer’s deposit requirements. For more information on the COBRA premium subsidy, visit the IRS website atwww.irs.gov and enter the key word COBRA.

If you are required to deposit your employment taxes, you must deposit them according to one of two deposit schedules, monthly or semiweekly. Which schedule you use for the current calendar year is based on the amount of taxes you reported during the four quarters (for 941 filers) or year (for 944 filers) in your lookback period. For details on lookback periods refer to Chapter 11 of Publication 15, (Circular E), Employer’s Tax Guide.

If you reported taxes of $50,000 or less during the lookback period, you are a monthly schedule depositor, and generally must deposit each month’s accumulated employment taxes on or before the 15th day of the following month. For example, taxes for January must be deposited by February 15th.

If you reported taxes greater than $50,000 for the lookback period, you are a semiweekly schedule depositor, and generally must deposit your employment taxes based on the following schedule:

• The employment taxes on payments made to your employees on Wednesday, Thursday, and/or Friday, must be deposited by the following Wednesday.
• The employment taxes on payments made to your employees on Saturday, Sunday, Monday, and/or Tuesday, must be deposited by the following Friday.

If any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the required deposit.

Regardless of whether you are a monthly schedule depositor or a semiweekly schedule depositor, if you accumulate taxes of $100,000 or more on any day during a deposit period, you must deposit the tax by the next business day. If this happens, you become a semiweekly depositor for at least the remainder of the calendar year and for the following calendar year. For details on the $100,000 Next-Day Deposit Rule, see Publication 15, (Circular E), Employer’s Tax Guide.

If you are a new employer, your taxes in the lookback period are considered to be zero for any quarter your business did not exist. Therefore, in the first year of business you are a monthly schedule depositor unless the $100,000 next day deposit rule applies.

If a deposit is required to be made on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. A business day is any day other than a Saturday, Sunday, or legal holiday. For example, if a deposit is required to be made on a Friday and Friday is a legal holiday, the deposit will be considered timely if it is made by the following Monday (if that Monday is a business day). The term “legal holiday” means any legal holiday in the District of Columbia. (See Chapter 11 of Publication 15, (Circular E), Employer’s Tax Guide.) A statewide legal holiday, other than those listed, does not delay the due date of federal tax deposits.

All deposits must be made by electronic funds transfer. Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS).

For deposits made by EFTPS to be on time, you must initiate the deposit by 8:00 p.m. Eastern time the day before the date the deposit is due. If you use a third party to make a deposit on your behalf, they may have different cutoff times. If you fail to initiate a deposit transaction on EFTPS by 8:00 p.m. Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA) for a same-day payment. If you ever need the same-day payment method, you will need to make arrangements with your financial institution ahead of time. Please check with your financial institution regarding availability, deadlines, and costs. Your financial institution may charge you a fee for payments made this way. To learn more about the information you will need to provide to your financial institution to make a same-day wire payment, visit www.eftps.gov to download the Same-Day Payment Worksheet.

There are penalties for depositing late, or for mailing payments directly to the IRS that are required to be deposited, unless you have reasonable cause for doing so.

Employers below the $2,500 threshold may remit the employment taxes with their Form 941 or Form 944, may voluntarily make deposits by EFTPS, or may use other methods of payment as provided by the instructions relating to the return.

To enroll in EFTPS, call 800-555-4477 for businesses, 800-316-6541 for individuals, or to enroll online, visit www.eftps.gov.

Refer to Publication 966 (PDF) for Electronic Federal Tax Payment System information and Publication 15, (Circular E), Employer’s Tax Guide, for more information on deposit rules.

Source: Internal Revenue Service
Last reviewed: September 19, 2013