Federal Tax Deposit 101: Everything Employers Must Know
Federal Tax Deposit 101: Everything Employers Must Know

Federal Tax Deposit 101: Everything Employers Must Know

What is a Federal Tax Deposit?

Most would agree that taxes is not an exciting topic. But a full understanding of the rules around taxes is absolutely essential for employers. It’s a major responsibility to manage employees and follow the requirements of withholding taxes from employee wages.

The IRS has specific and strict guidelines around withheld taxes. Any withheld taxes must be deposited to the IRS in the appropriate manner. This process is called the federal tax deposit.

In this guide, we’ll outline the important aspects of payroll processing and the federal tax deposit.

Before we dig into the federal tax deposit, these are the important areas within employee taxes and payroll.

  • Paycheck calculation and preparation
  • Withholding taxes and other required fees
  • Depositing withheld tax money from paychecks appropriately
  • Reporting on tax information, withholding, and deposit history

What is a Federal Tax Deposit Obligation?

There is a minimum amount of federal payroll taxes employees must meet. The precise number is set by the Federal Insurance Contributions Act or FICA. The federal tax deposit obligation is comprised of federal income, unemployment, Medicare taxes, and Social Security. The obligation applies to all workers whether seasonal, part-time, or full time.

Employers also have a federal tax deposit obligation. This is the total payroll tax liability which is reported on IRS form 941. This form is due on a quarterly basis.

The Federal Tax Deposit Coupon Defined

You may have never heard of the IRS Form 8109, also called the federal tax deposit coupon, but it is important for companies that meet the small business exception. For these companies, they must submit the federal tax deposit coupon along with the federal payroll taxes.

Finding Your Total Payroll Tax Liability

To find your payroll tax liability, the IRS has the 941 Form also called the Quarterly Wage and Tax Return. The form helps companies accurately determine the amount they must pay in a federal tax deposit.

How to Submit a Federal Tax Deposit

This is how companies electronically submit the federal tax deposit.

  1. Go to the IRS website to submit a federal tax deposit. The IRS requires deposits to be made electronically using an online system.
  2. Companies can also set up ACH credit payments which makes the process automated.
  3. Often a payroll service can be leveraged to file federal tax deposits on behalf of an employer.
  4. If necessary, a bank can even do same-day wire payments of the federal tax deposits.

Federal Tax Deposit Deadlines and Submission Due Dates

As for the deadlines for federal tax deposits, the IRS sets them. The deadlines and due dates are based on company size and employment tax obligations. The IRS uses the gross Social Security and Medicare liability of a company to define the tax deposit schedule.

The IRS notifies companies of their due dates every year by the end of the year so companies have time to prepare. The best strategy is to work with an accountant to stay on top of the details. In general, a common schedule is for the tax deposits to be due monthly by the 15th.

Payroll Software Can Help

Today, many companies rely on payroll software to help minimize the administrative and manual work of payroll. Today’s HR software has sophisticated features that help employers make sure payroll is executed accurately and according to regulations.

Some payroll systems can actually integrate with your payroll account and make the required deposits automatically, never missing a deadline. Want to learn more about how to make payroll and your federal tax deposit process run seamlessly?

Connect Today

More to Discover

Employee Safety During COVID-19: Compliance Toolkit

Employee Safety During COVID-19: Compliance Toolkit

Vaccines are coming to the rescue, but we’re not out of the woods yet. HR leaders can’t afford to take their eye off the ball when it comes to employee safety and compliance. Now’s the time to think about creating a vaccine policy that works for your organization, and it’s not too late to implement workplace testing. If an employee does test positive for COVID-19, you’ll want to make sure you’re ready to offer the right information and support to your whole team. Paycor is offering this free compliance toolkit, including customizable letter templates to use when you: Create a mandatory vaccine policy Implement workplace testing Inform your team that an employee has tested positive for COVID-19

Demotion Letter Template

Demotion Letter Template

There’s nothing better than seeing employees thrive, but setbacks and slips in performance do happen. One way to address performance problems is a demotion. Sometimes, it’s necessary to take a step back before you can take two steps forward. Download Demotion Letter Template When is a Demotion Necessary? In an ideal world, there wouldn’t be demotions. They are a sign something’s wrong: it could be that an employee has failed to respond to a performance improvement plan or they could just be disengaged. A demotion is the last stop before termination. If you believe the person has potential and is worth investing in, then a demotion might be the best way forward. Demotions are risky, though. You could end up with an employee who is even...

Maximum PTO Accrual Letter

Maximum PTO Accrual Letter

Encouraging employees to use their vacation days can feel strange. After all, nobody wants to leave themselves under-staffed and the rest of their team over-worked. On the other hand, what if employees rarely ever, or even never, take time off? That’s been a question facing business owners this year, as vacation plans were delayed, then cancelled, and PTO built up like never before.One problem is, PTO payout laws can turn unused PTO into an unwanted financial liability. There’s also a risk of schedule chaos down the line as everyone tries to use their days up at once. Most worrying of all is that employees who go too long without a break, even by choice, risk ending up disengaged and burned out. Download Sample Maximum PTO Accrual Letter...

How Long to Keep Payroll Records

How Long to Keep Payroll Records

Running a business, you know that compliance isn’t just about being compliant—you also need to prove it. You never know when the IRS, the DOL or the EEOC will demand to see your paperwork, which is why it’s so important to retain payroll records. To make things more complicated, each agency has its own rules for which documents you have to keep and for how long. The good news is, you don’t have to buy more filing cabinets. HR software can automatically store everything you need, with the added benefit of simplifying the whole payroll process. Why You Need to Retain Payroll Records At a federal level, you’re keeping payroll records primarily for three agencies: The IRS The Department of Labor (Wage and Hour Division) The EEOC These...