Federal Deposit Requirements for Withheld Payroll Taxes
Employers who withhold federal income taxes from the pay of employees must remit those amounts to the US Treasury in a timely manner. The timetable for the payment of withheld taxes largely depends on how quickly the funds accumulate. Employers can benefit from the expertise of a payroll service by ensuring that tax withholding is accurate and completed on schedule.
Most employers file IRS Form 941 on a quarterly basis to report withholding of income tax, Social Security, and Medicare. Some smaller employers are allowed to file one IRS Form 944 annually, instead of Form 941. Total withholding also includes the contributions paid by an employer to match the Social Security and Medicare amounts withheld from employee wages.
Withholding under $2,500
For smaller companies, withheld amounts can be paid with your tax return as it is filed. Annual filers with withholding under $2,500 can submit the balance with Form 944. Quarterly filers with less than $2,500 in withholding may pay the amount with Form 941. Companies that withhold more than $2,500 in a quarter are required to make tax deposits prior to filing the associated return.
Withholding over $2,500
Withheld funds increase with each pay period. Companies that accumulate more than $2,500 in withholding per quarter are required to deposit funds either monthly or twice weekly. Whether deposits are required monthly or semiweekly usually depends on the level of withholding over the two previous calendar years.
Required deposit frequency
For quarterly filers, withholding from the first two quarters of the prior calendar year is added to withholding from the last two quarters of the second calendar year back. If the total is under $50,000, you are allowed to make monthly deposits for the current year. If that total is over $50,000, you are required to deposit withheld funds twice each week for the remainder of the year.
A larger company that accumulates a $100,000 withholding liability must deposit the taxes by the next banking day. Remaining balances accompanying Form 941 or Form 944 can be paid by several methods, but required deposits must be made electronically. Many companies set up an account with the government to electronically submit tax payments.
The US Treasury provides a website for the payment of federal taxes. The Electronic Federal Tax Payment System, also known as EFTPS, adds no additional cost. In addition to ensuring the accuracy of tax deposits, a payroll service can issue paychecks and provide year-end IRS Form W-2 statements. Contact a payroll tax service like A & C Accounting & Tax for more information about employment tax issues.
