New year is a good time review deposit rules

Now that the calendar has turned to 2015, this is a good time to remind employers of the 941 tax deposit rules. These employment taxes include (1) both the employee and employer share of FICA tax; (2) the additional 0.9 percent Medicare tax withheld from employees’ wages; and (3) federal income tax withheld from employees’ wages.There are substantial penalties for not making timely payments. It is very important that you understand the deposit rules, especially if you handle submitting your payroll tax deposits in-house and do not outsource this responsibility to a third-party payroll service provider. Generally, all employers are required to make payroll tax deposits electronically.

The timing and frequency of an employer’s deposits are determined annually, based on the employer’s history during a lookback period.  The lookback period for each calendar year is the 12-month period ending on the preceding June 30.  An employer is either a monthly or semiweekly depositor for each calendar year, depending on the amount of employment taxes accumulated during the lookback period.  However, a special one-day rule applies to employers with $100,000 or more of accumulated employment taxes (discussed further below).

Lookback Period for Calendar Year 2015:

Lookback Period
July 1, 2013 Oct. 1, 2013 Jan. 1, 2014 April 1, 2014
through through through through
Sept. 30, 2013 Dec. 31, 2013 March 31, 2014 June 30, 2014

You are considered a monthly schedule depositor for a calendar year if the aggregate amount of employment taxes on Form 941, Line 10, for the four quarters in your lookback period were $50,000 or less. Under the monthly deposit schedule, deposit employment taxes on payments made during a month by the 15th day of the following month.

You are a semiweekly schedule depositor for a calendar year if the aggregate amount of employment taxes on Form 941, Line 10, during your lookback period were more than $50,000. Under the semiweekly deposit schedule, deposit employment taxes for payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Deposit taxes for payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday.

Semiweekly Deposit Schedule:

IF the payday falls on a …. THEN deposit taxes by
the following …
Wednesday, Thursday,
and/or Friday
Wednesday
Saturday, Sunday,
Monday, and/or Tuesday
Friday

If you accumulate $100,000 or more in taxes on any day during a monthly or semiweekly deposit period, you must deposit the tax by the next business day, whether you are a monthly or semiweekly schedule depositor.  Further, if this rule applies to a monthly depositor, it ceases to be a monthly depositor on the first day after becoming subject to the one-day rule and becomes a semiweekly depositor for the remainder of that calendar year as well as the following calendar year.

Please contact our office should you need additional information.