Federal Tax Deposit

What Is a Federal Tax Deposit?

As an employer, one of your biggest responsibilities is to withhold taxes from your employees’ wages. When taxes are withheld, they must be deposited to the IRS according to their requirements. When you make a deposit of those taxes, you are making a federal tax deposit.

What Is a Federal Tax Deposit Obligation?

All of your employees must pay a minimum amount in federal payroll taxes.

The percentages may be different from one employee to the next, but the minimum amounts are specified in the Federal Insurance Contributions Act, or FICA. An employee’s federal tax deposit obligation includes their federal income, unemployment, Social Security, and Medicare taxes. It doesn’t matter whether the employee is part-time, full-time, or seasonal; they all must have a minimum amount withheld.

As an employer, you have a total federal tax deposit obligation, or total payroll tax liability. This is reported on IRS Form 941, which is due quarterly (by the last day of the month after the end of the quarter). However, you must make payroll tax deposits throughout the quarter, on a monthly or semi-monthly schedule.

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What Is a Federal Tax Deposit Coupon?

A federal tax deposit coupon is another term for IRS Form 8109.

You can get Form 8109 through the IRS website or from your nearest tax office. But since this form accompanies a physical deposit of your federal payroll taxes (like a check), and applies only to companies meeting the small business exception, you may never have used one. Otherwise, you must submit your federal tax deposits electronically.

The 4 Methods for Making Federal Tax Deposits Electronically

To submit your federal tax deposits electronically, you have four different options. They include:

  1. The IRS’ [Electronic Federal Tax Payment System]. This can be done online or over the phone via the IRS voice response payment system.
  2. ACH credit payments. You may ask your bank to set up ACH payments on your behalf.
  3. Your accountant or payroll service. As long as you can trust them to make the payments for you by the due date, this is a good option. Just be aware that penalties can be steep when due dates are missed.
  4. Under rare circumstances, you can ask your bank to wire same-day tax payments for you.

A Word About Federal Tax Deposit Due Dates

Your required schedule for submitting your federal tax deposit of income and FICA taxes depends on the size of your employment tax obligation.

Typically, the IRS will let you know toward the end of each year which schedule you should be on for the next year. Your schedule may be annually, quarterly, monthly, or semi-weekly. Unless you have a very small number of employees, you’re most likely on a semi-weekly or monthly schedule. Specific dates may vary from year to year, so you’ll want to check with your accountant or the [IRS] for your specific schedule and the latest due dates for the current year.

That said, generally speaking, employers who make federal tax deposits on a monthly basis must pay by the employment taxes due by 15th of every month (for the previous month), unless the 15th falls on a weekend or holiday. In that case, the due date is usually moved to the following Monday.

If you pay on a semi-weekly schedule, your federal tax deposits for each pay period are typically due within 2-3 days of the day you make payroll, with consideration made for weekends and holidays. However, please check with a qualified accountant to be assured you make your deposits on or before the due dates.