Federal Tax Deposit: What It Means for Employers

What it means in practice

Besides withholding and reporting, employers must deposit payroll taxes with the Treasury on a set schedule. Deposit timing is fixed by Treasury regulations at 26 CFR 31.6302-1 and explained in section 11 of IRS Publication 15 (2026), and it is usually due long before the quarterly Form 941 or annual Form 944 is filed. How the amounts build up between payday and deposit day is covered in payroll liabilities, and the payment channels themselves in electronic funds transfer (EFT). This entry covers when a deposit is due and what happens when it is late.

What gets deposited. The monthly and semiweekly rules cover the employee share of FICA under section 3102, the employer share under section 3111, and income tax withheld under section 3402 (26 CFR 31.6302-1(e)). How much to withhold is covered in federal income tax withholding, and the employer's own taxes in employer payroll taxes. Publication 15 requires separate deposits for Form 945 nonpayroll withholding and for farmworker (Form 943) taxes, and FUTA follows its own quarterly rule.

How the schedule is set: the lookback period. Before each calendar year, an employer determines whether it is a monthly or semiweekly schedule depositor. For Form 941 filers, the test is the total tax reported on Form 941, line 12, for the four quarters from July 1 of the second preceding year through June 30 of the preceding year. For 2026, that is July 1, 2024 through June 30, 2025. $50,000 or less makes the employer a monthly depositor for the whole year; more than $50,000 makes it semiweekly. Pay frequency does not matter (Pub 15). Form 943 and Form 944 filers instead look at the second preceding calendar year (2024 for 2026), and a 2026 Form 941 filer that filed Form 944 in 2024 or 2025 also uses calendar year 2024. Later Form 941-X corrections do not change the lookback figure.

New employers. Quarters before a business started or was acquired count as zero, so a Form 941 filer is a monthly depositor for its first calendar year, and a Form 943, 944 or 945 filer for its first two calendar years, unless the $100,000 next-day rule applies (Pub 15 (2026)). Publication 15 says a new employer that indicated a federal tax obligation when requesting an EIN is pre-enrolled in EFTPS and receives a PIN by mail to activate.

The monthly schedule. A monthly depositor deposits the taxes on payments made during a calendar month by the 15th day of the following month. The deposit period is the calendar month, and liability arises when wages are paid, not when they are earned or accrued ("cash basis," in Publication 15's words). A month with no wages paid creates no deposit obligation. Monthly depositors still file Form 941 quarterly, not monthly.

The semiweekly schedule. A semiweekly depositor has two deposit periods each week. Taxes on payments made Wednesday through Friday are due the following Wednesday; taxes on payments made Saturday through Tuesday are due the following Friday. A semiweekly depositor that pays monthly still deposits only once a month. When one semiweekly period spans two quarters, separate deposits are required. Publication 15 gives a Wednesday, September 30, 2026 payday and a Friday, October 2, 2026 payday: two deposits, both due Wednesday, October 7, 2026. Semiweekly depositors report their liabilities by payday on Schedule B (Form 941).

Business days and legal holidays. A deposit due on a Saturday, Sunday or legal holiday is timely if made by the close of the next business day. For deposit purposes, "legal holiday" means a legal holiday in the District of Columbia, not other statewide holidays. Semiweekly depositors always get at least three business days after the period closes, plus one more day for each legal holiday among the three weekdays that follow. Publication 15 (2026) lists these 2026 legal holidays: January 1, January 19, February 16, April 16 (District of Columbia Emancipation Day), May 25, June 19, July 3, September 7, October 12, November 11, November 26 and December 25.

The $100,000 next-day rule. If an employer accumulates $100,000 or more of taxes on any day during a deposit period, the full accumulated amount is due by the close of the next business day, whatever the employer's schedule (26 CFR 31.6302-1(c)(3)). The threshold is measured before any reduction for nonrefundable credits. Only taxes within the current deposit period count toward the threshold. A monthly depositor that triggers the rule becomes a semiweekly depositor the next day for the rest of that year and all of the following year.

The $2,500 rule and payment with a return. Publication 15 lists cases where tax may be paid with a timely filed return instead of deposited, without penalty. For Form 941, the main one is a total tax liability (line 12) of less than $2,500 for either the current quarter or the prior quarter, with no $100,000 next-day obligation during the current quarter. When unsure, Publication 15 says to deposit under the regular rules. The Form 944 instructions note that the $2,500 deposit threshold is different from the $1,000-or-less annual liability that makes an employer eligible to file Form 944, so a Form 944 filer whose business grows during the year may have to start depositing.

The accuracy of deposits rule. Employers must deposit 100% of the liability by the due date, but no penalty applies to a shortfall that does not exceed the greater of $100 or 2% of the amount due, if the shortfall is made up by the makeup date (26 CFR 31.6302-1(f)). A monthly depositor may deposit the shortfall or pay it with the return by the return due date. A semiweekly depositor must deposit it by the earlier of the first Wednesday or Friday on or after the 15th of the following month, or the return due date.

FUTA deposits. FUTA tax is not deposited on the monthly or semiweekly schedule. Publication 15 (2026), section 14, says to figure it quarterly, multiplying FUTA taxable wages paid during the quarter by 0.6% (assuming the full state credit) and stopping when an employee's taxable wages reach $7,000 for the year. A quarter's liability of $500 or less may be carried forward; once the cumulative amount is over $500, it must be deposited by EFT by the last day of the month after the quarter ends (April 30, July 31, October 31 and January 31). Any added FUTA owed because of a credit reduction state is included with the fourth-quarter deposit. The tax itself is explained in Federal Unemployment Tax Act (FUTA).

How a deposit is made. Deposits go through EFTPS, IRS Direct Pay, the IRS business tax account or a trusted third party. Publication 15 (2026) says EFTPS accepts same-day payments of $1 million or less submitted before 3:00 p.m. Eastern time on a business day, and larger payments by 8:00 p.m. Eastern time the day before the due date. The IRS says EFTPS enrollment can take up to five business days. An EFT deposit counts as made when the amount is withdrawn from the employer's account, if it is not returned or reversed (26 CFR 31.6302-1(h)(8)).

Reporting liabilities, not deposits. A monthly depositor enters its monthly tax liabilities on Form 941, line 16; a semiweekly depositor enters daily liabilities on Schedule B. These are liabilities, not deposits. If the liability is $2,500 or more and the schedule is missing, done on the wrong form, or filled with deposits instead of liabilities, Publication 15 says the IRS may assess an "averaged" failure-to-deposit penalty of 2% to 10%. Form 941 is due by the last day of the month after the quarter, or by the 10th day of the second month if all deposits for the quarter were made on time and in full.

How the penalty works. Under 26 U.S.C. 6656, the penalty does not apply if the failure was due to reasonable cause and not willful neglect. The IRS counts calendar days from the due date and states that the rates "don't add up": a deposit more than 15 days late draws 10%, not 2% plus 5% plus 10%. Publication 15 also lists a 10% rate for amounts that should have been deposited but were paid directly to the IRS or with the return, unless an exception applies. Interest is charged on penalties. Deposits are applied to the most recent liability in the quarter, and an employer may designate a different application within 90 days of a penalty notice (26 U.S.C. 6656(e)). The IRS may waive the penalty for an inadvertent failure in the first quarter an employer must deposit, or the first deposit after a frequency change, if the return was timely and net worth limits are met: $2 million for individuals, and $7 million and no more than 500 employees for businesses. Unpaid withheld taxes can also lead to the trust fund recovery penalty; see payroll liabilities.

Using a payroll provider. Publication 15 says an employer that uses a payroll service provider "remains liable for its employment tax obligations," and that an employer enrolled in EFTPS by a third party receives an Inquiry PIN to monitor deposits.

Recordkeeping. Publication 15 says to keep employment tax records for at least 4 years, including the dates and amounts of tax deposits and the acknowledgment numbers for deposits made by EFTPS.

Example 1: finding the 2026 schedule (illustration). An employer reported Form 941 line 12 taxes of $11,000, $12,000, $13,000 and $14,000 for the four quarters from July 2024 through June 2025, a total of $50,000. Because the total is $50,000 or less, it is a monthly depositor for 2026. Its October 2026 taxes would be due November 15, 2026, a Sunday, so a deposit on Monday, November 16 is timely.

Example 2: a holiday week on the semiweekly schedule (illustration). A semiweekly depositor pays wages on Tuesday, November 24, 2026. The deposit would normally be due Friday, November 27. Thanksgiving, Thursday, November 26, is one of the three weekdays after the period closes, so the employer gets one extra business day and the deposit is due Monday, November 30.

Example 3: the next-day rule (illustration). A monthly depositor's March 2026 taxes reach $104,000 on Tuesday, March 17. All $104,000 is due by Wednesday, March 18, and the employer is a semiweekly depositor from March 18 through the end of 2027.

Example 4: a small shortfall and a late deposit (illustration). A semiweekly depositor owes $20,000 for a Friday, March 20, 2026 payday, due Wednesday, March 25, and deposits $19,700. The $300 shortfall is under the greater of $100 or 2% ($400), so no penalty applies if it is deposited by Wednesday, April 15, 2026, the first Wednesday or Friday on or after April 15, which comes before the April 30 return due date. If instead an $8,000 deposit were 4 days late, the penalty would be 2% ($160); 12 days late, 5% ($400); 20 days late, 10% ($800), not 17%.

Example 5: FUTA carryforward (illustration). Assuming the full state credit, an employer's FUTA liability is $240 in the first quarter of 2026 and $210 in the second. The cumulative $450 is $500 or less, so nothing is deposited. A third-quarter liability of $90 brings the total to $540, which is due October 31, 2026; that is a Saturday, so Monday, November 2 is timely.

Where states differ. State income and unemployment taxes follow state deposit rules. As examples: California's Employment Development Department ties how often employers deposit state personal income tax and SDI to their federal deposit schedule and state withholding amount, makes UI and ETT contributions due quarterly, and lists a 15% penalty plus interest on late payments. New York's Department of Taxation and Finance requires Form NYS-1 after each payroll that brings accumulated withholding to $700 or more, due within 5 or 3 business days depending on prior withholding. Check your own state agency.

This entry describes the federal deposit rules in general terms; it is not tax advice. Check Publication 15 and the current form instructions for your situation.

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