One of the biggest challenges with managing payroll independently is meeting a nonstop series of deadlines. All employment-related tasks, from collecting new hire forms to depositing payroll taxes with government agencies, must be completed promptly. Failure to do so puts businesses at risk for fines, penalties and audits. Employers can avoid these negative consequences by first understanding which taxes apply to them and then adhering to the appropriate payroll tax deposit schedule.
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What are the federal employment taxes?
Federal payroll taxes include income tax, Federal Insurance Contribution Act (FICA) taxes, Additional Medicare Tax and Federal Unemployment Tax Act (FUTA) taxes. Some of these taxes are paid by both the employer and employee; others are paid solely by one party or the other.
Federal income tax
The federal government generally requires employers to withhold income tax from their employees’ wages. The exact amount to deduct can be determined using each employee’s Form W-4, Employee’s Withholding Certificate and the withholding tables in Internal Revenue Service (IRS) Publication 15-T.
FICA taxes
FICA consists of Medicare tax and Social Security tax, each with separate rates. The two differ further in that Social Security has a wage base limit, but Medicare does not.
Employers can calculate these taxes by multiplying the Medicare and Social Security tax rates against the employee’s gross taxable wages. The result is the total tax liability, of which the employer and employee pay an equal share. Employers should refer to IRS Publication 15, (Circular E), Employer's Tax Guide for the latest FICA tax rates and Social Security wage base limit.
Additional Medicare tax
Employees earning more than $200,000 per year must pay Additional Medicare Tax. The tax liability begins the first pay period the individual’s earnings exceed $200,000 and continues until the end of the calendar year. Employers withhold this tax from their employees’ wages but are not required to pay any portion of it.
FUTA tax
Businesses with employees who aren’t considered household or agricultural workers may be subject to FUTA tax if the following two conditions are met:
- Wages paid to employees met or exceeded $1,500 during any quarter in either of the past two years.
- One or more people were employed for at least some part of a day in 20 or more different weeks in either of the past two years.
Only employers pay FUTA tax. More information is available in the IRS instructions for Form 940.
Payroll tax deposit schedules for income and FICA taxes
The IRS permits semiweekly and monthly deposit schedules for income and FICA taxes. Which option a business may choose depends on the total tax liability it reported during a specific lookback period. Generally, payroll tax liabilities less than $50,000 during the lookback period necessitate a monthly frequency and tax liabilities greater than $50,000 require a semiweekly deposit frequency.
Monthly deposit schedule
Employment taxes on payments made to employees during a given month are due by the 15th day of the following month. For example, the total federal income tax and FICA tax liability accumulated in June would be due by July 15.
Semiweekly payroll deposit schedule
Semiweekly payroll tax deposit schedules depend on when employees are paid. If payday falls between Wednesday and Friday, employers must deposit taxes by the following Wednesday. If payday falls between Saturday and Tuesday, they must deposit taxes by the following Friday.
Next-day deposits
Businesses that accumulate $100,000 or more in income and FICA taxes withheld in a single day must deposit the taxes by the next business day. This rule applies to both semiweekly and monthly depositors.
Payroll tax deposit schedule for FUTA tax
FUTA tax deposit schedules depend on a business’s tax liability each quarter. If the FUTA tax liability is $500 or less in a quarter, it may be carried over to the next quarter. If the FUTA tax liability for a given quarter (including any carryover from a previous quarter) exceeds $500, it must be paid by the last day of the month following the end of the quarter. For example, FUTA tax liabilities for the first quarter would be due April 30.
Why do payroll tax deposit due dates matter?
Adhering to the proper payroll tax deposit schedules is essential to the financial health of an organization. Employers who don’t pay the taxes on time or in the correct amounts may be subject to failure-to-deposit (FTD) penalties from the IRS. These penalties range in severity from 2% to 15%, depending on how many days the tax deposits are past due.
Once behind, it can be difficult to catch up. The IRS automatically applies deposits to the most recent tax liability in a quarter, followed by past-due balances. Employers can designate how future deposits are applied to minimize their penalties, but they must do so within 90 days of the date on the penalty notice.
Guidebook Reduce payroll tax management risks
How to deposit employment taxes
Employers must deposit their payroll taxes electronically. They have the following options:
- Direct pay from a bank account
- Business tax account with the IRS
- Electronic Federal Tax Payment System (EFTPS)
Sending deposits by mail instead of using one of the electronic methods could result in a penalty.
How to file payroll tax returns
The IRS requires employers to report how much they pay in payroll taxes. These reports are filed quarterly or annually, depending on the business’s total tax liability. Regular mail and electronic files are acceptable.
Payroll tax returns for income tax and FICA taxes
Employers report their income tax and FICA tax deposits using the form most applicable to their business. Options include:
- Form 941, Employer's Quarterly Federal Tax Return
- Form 943, Employer's Annual Federal Tax Return for Agricultural Employees
- Form 944, Employer’s Annual Federal Tax Return
- Form 945, Annual Return of Withheld Federal Income Tax
Payroll tax returns for FUTA
Employers report their FUTA deposits at the end of the year using Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.
How to make paying and filing payroll taxes easier
Depositing payroll taxes and filing returns can be complex. Consequently, many businesses partner with payroll service providers to help them improve efficiency and reduce risks and costs. ADP, for instance, offers the following tax assistance services:
- Intelligent technology that helps flag errors in tax information
- Automated tax deposits and filings for federal, state and local jurisdictions
- 24/7 secure access to tax filings, reports, deposits, amendments and notices
- Year-end print services for Forms W2 and 1099
- Registration services to obtain state tax ID numbers
See how simple small business payroll can be.
Compare PackagesFrequently asked questions about payroll deposit schedules
What is the IRS lookback period used for?
Employers use IRS lookback periods to determine how often they must deposit their payroll taxes. These periods vary based on whether a business files Forms 941, 943, 944 or 945.
What is my federal deposit schedule?
Generally, businesses that have payroll tax liabilities less than $50,000 during their lookback period follow a monthly schedule. Businesses with payroll tax liabilities exceeding $50,000 during their lookback period follow a semiweekly schedule.
How do I know if I'm a monthly or semiweekly depositor?
Most federal and state tax agencies issue correspondence at the start of each year notifying businesses of their deposit frequency. If that frequency changes at any point during the year, the agencies send an updated notice to the employer.
What is the semiweekly depositor rule?
Employers who pay their employees on a Wednesday, Thursday or Friday must deposit their tax by the following Wednesday. Those who pay their employees on a Saturday, Sunday, Monday or Tuesday must deposit their taxes by the following Friday.
This guide is intended to be used as a starting point in analyzing monthly and semiweekly payroll deposit schedules and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
