Federal Tax

UNDERSTANDING THE FEDERAL TAX DEPOSIT SCHEDULES

Federal Tax Deposits, or FTDs, are deposits that an employer must make to cover certain taxes related to its employees.

FTDs cover four basic types of taxes and payments: the income tax, Social Security, Medicare and Federal Unemployment Tax (FUTA).  Some of these taxes will be withheld from the pay checks of your employees, and some will be contributed by you, the employer (for example, a portion of the Social Security tax).  These taxes must be calculated for each payroll, whether weekly, bi-weekly or otherwise.  Depending on the total amount of these taxes, you may be required to pay them through Federal Tax Deposits, according to a schedule.

You will need to pay Federal Tax Deposits if you meet the following criteria:

* If your quarterly Form 941 federal taxes due are $2,500 or more for the current quarter and the prior quarter, OR if they are $100,000 or more within a deposit period (monthly, or semi-weekly) for the current quarter

* If your annual Form 944 taxes due are $2,500 or more;

* If your Form 940 taxes due PER QUARTER are more than $500

If you fulfill any of the above criteria, you will have to deposit your federal taxes.

Deposit Schedules for Forms 941 and 944

For taxes reported on forms 941 and 944, to determine which schedule to use, you will need to look at the tax liabilities reported by you during the “lookback period”.

If you file forms 941, then your lookback period for the year 2014 consists of four calendar quarters, beginning with the July 1st through Sep 30th (third) quarter of 2012, and ending with the April 1st through June 30th (second) quarter of 2013.  If you reported $50,000 or less of Form 941 taxes during this lookback period, then for the year 2014 you are a Monthly depositor, UNLESS you are due to pay $100,000 or more within a deposit period, in which case you must pay this amount on the next business day after it becomes due, and then switch to being a Semi-weekly depositor.  If you reported more than $50,000 of Form 941 federal taxes during the look back period, then for the year 2014 you are a Semi-weekly depositor.

If you file Form 944, then your lookback period for the year 2014 is the calendar year preceding the previous calendar year.  In other words, for 2014, your lookback period is 2012.  This is true even if in 2012 you were required to file Forms 941.  In that case, you will simply add the total liabilities from the four Forms 941 you filed in that year.

How to make timely payments, depending on your schedule:

If you follow the Monthly schedule, then you would be expected to add together all the payroll taxes for a given month, and deposit that amount by the 15th day of the following month (or by the close of the next business day, if the 15th is a non-business day).

If you follow the Semiweekly schedule, then the due date of your payment would depend on the day you paid wages: if you paid wages on a Saturday, Sunday, Monday or Tuesday, then your deposit would be due the following Friday.  If you paid wages on Wednesday, Thursday or Friday, then the deposit would be due by the following Wednesday.  Please note that it may be possible that the end of a quarterly period for a 941 return falls on a day other than Friday or Tuesday.  If this occurs, then you will have a semi-weekly period that belongs in two different filing periods.  In this case, you have TWO separate deposit obligations.  In any case, you will have at least three business days to make the deposit.

If you do not meet any of the deposit criteria, you still need to deposit your 941 or 944 federal taxes, but do not need to follow the Monthly or Semi-weekly schedule.  Instead, you may deposit these federal taxes when the corresponding tax filings are due.

Deposit Schedule for Form 940

For Form 940 purposes, if your FUTA tax in a given quarter is LESS than $500, then you do not need to make a deposit for that quarter.  Instead, you will carry over the tax liability to the next quarter, and add it to that quarter’s liability.  Continue this process until the total federal tax liability exceeds $500; when it does, you are then required to deposit the liability by the last day of the month following the end of the quarter.  So, if the quarter ends on June 30th, you must deposit the liability by July 31st.  If your yearly liability does not exceed $500, you may deposit it, or simply pay it when you file your Form 940 by January 31st.