For tax return periods beginning in 2001, you must deposit social
security and Medicare taxes if your net taxes (line 10 of Form 941-SS
or line 11 of Form 943) are $2,500 or more for the tax return period.
You make the deposits either electronically or with paper coupons.
These methods are discussed later.
When To Deposit
Note: Under the rules discussed below, the only
difference between farm and nonfarm workers' employment tax deposit
rules is the lookback period. Therefore, farm and nonfarm workers are
discussed together except where noted.
Depending on your total taxes reported during a lookback period
(discussed below), you are either a monthly schedule depositor
or a semiweekly schedule depositor.
The terms "monthly schedule depositor" and "semiweekly
schedule depositor"do not refer to how often you pay
your employees or how often you are required to make deposits. The
terms identify which set of rules you must follow when a tax liability
arises (when you have a payday).
You will need to determine your deposit schedule for a calendar
year based on the total employment taxes reported on line 10 of Form
941-SS, line 11 of Form 941, or line 9 of Form 943 for your lookback
period (defined below). If you filed both Forms 941-SS and 941 during
the lookback period, combine the tax liabilities for these returns for
purposes of determining your deposit schedule. Determine your deposit
schedule for Form 943 separately from Forms 941-SS and 941.
Lookback period for employers of nonfarm workers.
The lookback period for Form 941-SS (or Form 941) consists of 4
quarters beginning July 1 of the second preceding year and ending June
30 of the prior year. These 4 quarters are your lookback period even
if you did not report any taxes for any of the quarters. For 2001, the
lookback period is July 1, 1999, through June 30, 2000.
lookback
Lookback period for employers of farmworkers.
The lookback period for Form 943 is the second calendar year
preceding the current calendar year. The lookback period for calendar
year 2001 is calendar year 1999.
Adjustments to lookback period taxes.
To determine your taxes for the lookback period, use only the tax
you reported on the original returns (Forms 941-SS, 941, or 943). Do
not include adjustments made on a supplemental return filed after the
due date of the return. However, if you make adjustments on Form
941-SS or 943, the adjustments are included in the total tax for the
period in which the adjustments are reported.
Example of adjustments.
An employer originally reported total taxes of $45,000 for the
lookback period. The employer discovered during February 2001 that the
tax during the lookback period was understated by $10,000 and
corrected this error with an adjustment on the 2001 first quarter Form
941-SS. The employer is a monthly schedule depositor for 2001 because
the lookback period tax liabilities are based on the amounts
originally reported, and they were less than $50,000. The $10,000
adjustment is treated as part of the 2001 taxes.
Monthly Deposit Schedule
If the total tax reported for the lookback period is $50,000 or
less, you are a monthly schedule depositor for the current year. You
must deposit taxes on payments made during a calendar month by the
15th day of the following month.
New employers.
During the first calendar year of your business, your taxes for the
lookback period are considered to be zero. Therefore, you are a
monthly schedule depositor for the first calendar year of your
business (but see the $100,000 Next-Day Deposit Rule
later).
Semiweekly Deposit Schedule
If the total tax reported for the lookback period is more than
$50,000, you are a semiweekly schedule depositor for the current year.
If you are a semiweekly schedule depositor, you must deposit on
Wednesday and/or Friday, depending on what day of the week you make
wage payments, as follows:
- Deposit taxes on payments made on Wednesday, Thursday,
and/or Friday by the following Wednesday.
- Deposit taxes on payments made on Saturday, Sunday, Monday,
and/or Tuesday by the following Friday.
The end of the return period always ends a semiweekly deposit
period and begins a new one. For example, if the return period ends on
Thursday, then the preceding Wednesday and that Thursday form one
deposit period and Friday becomes a deposit period in the new return
period. Taxes on payments made on Wednesday and Thursday are subject
to one deposit obligation and taxes on payments made on Friday are
subject to a separate obligation.
Deposit Period
The term "deposit period" refers to the period during which
tax liabilities are accumulated for each required deposit due date.
For monthly schedule depositors, the deposit period is a calendar
month. The deposit periods for semiweekly schedule depositors are
Wednesday through Friday and Saturday through Tuesday.
Examples of Monthly and Semiweekly Schedules
Employers of nonfarm workers.
Rose Co. reported Form 941-SS taxes as follows:
| 2000 Lookback Period |
| 3rd Quarter 1998 |
-- |
$12,000 |
| 4th Quarter 1998 |
-- |
$12,000 |
| 1st Quarter 1999 |
-- |
$12,000 |
| 2nd Quarter 1999 |
-- |
$12,000 |
| | $48,000 |
| 2001 Lookback Period |
| 3rd Quarter 1999 |
-- |
$12,000 |
| 4th Quarter 1999 |
-- |
$12,000 |
| 1st Quarter 2000 |
-- |
$12,000 |
| 2nd Quarter 2000 |
-- |
$15,000 |
| | $51,000 |
Rose Co. is a monthly schedule depositor for 2000 because its taxes
for the 4 quarters in its lookback period ($48,000 for the 3rd quarter
of 1998 through the 2nd quarter of 1999) were not more than $50,000.
However, for 2001, Rose Co. is a semiweekly schedule depositor because
the total taxes for the 4 quarters in its lookback period ($51,000 for
the 3rd quarter of 1999 through the 2nd quarter of 2000) exceeded
$50,000.
Employers of farmworkers.
Red Co. reported taxes on its 1998 Form 943 of $48,000. On its 1999
Form 943, it reported taxes of $60,000.
Red Co. is a monthly schedule depositor for 2000 because its taxes
for its lookback period ($48,000 for calendar year 1998) were not more
than $50,000. However, for 2001, Red Co. is a semiweekly schedule
depositor because the total taxes for its lookback period ($60,000 for
calendar year 1999) exceeded $50,000.
Deposits on Banking Days Only
If a deposit due date falls on a day that is not a banking day, the
deposit is considered timely if it is made by the close of the next
banking day. In addition to Federal and state bank holidays, Saturdays
and Sundays are treated as nonbanking days. For example, if a deposit
is required to be made on Friday, but Friday is not a banking day, the
deposit is considered timely if it is made by the following Monday (if
Monday is a banking day).
Semiweekly schedule depositors will always have at least
3 banking days to make a deposit. That is, if any of the 3 weekdays
after the end of a semiweekly period is a banking holiday, you will
have one additional banking day to deposit. For example, if a
semiweekly schedule depositor accumulated taxes for payments made on
Friday and the following Monday is not a banking day, the deposit
normally due on Wednesday may be made on Thursday (allowing 3 banking
days to make the deposit).
Application of Monthly and Semiweekly Schedules
The examples below illustrate the procedure for determining the
deposit date under the two different deposit schedules.
Monthly schedule example.
Green Inc. is a seasonal employer and a monthly schedule depositor.
It pays wages each Friday. During January 2001, it paid wages but did
not pay any wages during February. Green Inc. must deposit the
combined tax liabilities for the January paydays by February 15. Green
Inc. does not have a deposit requirement for February (due by March
15) because no wages were paid in February and, therefore, it did not
have a tax liability for February.
Semiweekly schedule example.
Blue Co., a semiweekly schedule depositor, pays wages on the last
day of the month. Blue Co. will deposit only once a month because it
pays wages only once a month, but the deposit will be made under the
semiweekly deposit schedule as follows. Blue Co.'s tax liability for
the April 30, 2001 (Monday) payday must be deposited by May 4, 2001
(Friday).
Payment With Return
For tax return periods beginning in 2001, you may make a payment
with Forms 941-SS or 943 instead of depositing if:
- You accumulate less than a $2,500 tax liability during the
return period (line 10 of Form 941-SS or line 11 of Form 943).
However, if you are unsure that you will accumulate less than $2,500,
deposit under the rules explained in this section so that you will not
be subject to failure to deposit penalties, or
- You are a monthly schedule depositor and make a payment in
accordance with the Accuracy of Deposits Rule discussed
later. This payment may be $2,500 or more. Caution:
Only monthly schedule depositors are allowed to make this
payment with the return.
$100,000 Next-Day Deposit Rule
If you accumulate taxes of $100,000 or more on any day during a
deposit period, you must deposit by the close of the next banking day,
whether you are a monthly or a semiweekly schedule depositor. For
monthly schedule depositors, the deposit period is a calendar month.
For semiweekly schedule depositors, the deposit periods are Wednesday
through Friday and Saturday through Tuesday.
For purposes of the $100,000 rule, do not continue accumulating
taxes after the end of a deposit period. For example, if a semiweekly
schedule depositor has accumulated taxes of $95,000 on Tuesday and
$10,000 on Wednesday, the $100,000 next-day deposit rule does not
apply because the $10,000 is accumulated in the next deposit period.
Thus, $95,000 must be deposited by Friday and $10,000 must be
deposited by the following Wednesday.
In addition, once you accumulate at least $100,000 in a deposit
period, stop accumulating at the end of that day and begin to
accumulate anew on the next day. For example, Fir Co. is a semiweekly
schedule depositor. On Monday, Fir Co. accumulates taxes of $110,000
and must deposit on Tuesday, the next banking day. On Tuesday, Fir Co.
accumulates additional taxes of $30,000. Because the $30,000 is not
added to the previous $110,000 and is less than $100,000, Fir Co. must
deposit the $30,000 by Friday using the normal semiweekly deposit
schedule.
If you are a monthly schedule depositor and you accumulate a
$100,000 tax liability on any day during a month, you become a
semiweekly schedule depositor on the next day and remain so for the
remainder of the calendar year and for the following calendar year.
Example of $100,000 next-day deposit rule. Elm Inc.
started business on May 4, 2001. Because Elm Inc. is a new employer,
the taxes for its lookback period are considered to be zero;
therefore, Elm Inc. is a monthly schedule depositor. On May 11, Elm
Inc. paid wages for the first time and accumulated taxes of $40,000.
On May 18 (Friday), Elm Inc. paid wages and accumulated taxes of
$60,000, for a total of $100,000. Because Elm Inc. accumulated
$100,000 on May 18, it must deposit $100,000 by May 21 (Monday), the
next banking day. Elm Inc. immediately becomes a semiweekly schedule
depositor for the remainder of 2001 and for 2002 but may be subject to
the $100,000 next-day deposit rule if it accumulates $100,000 again in
any semiweekly deposit period.
Accuracy of Deposits Rule
You are required to deposit 100% of your tax liability on or before
the deposit due date. However, penalties will not be applied for
depositing less than 100% if both of the following
conditions are met:
- Any deposit shortfall does not exceed the greater of $100 or
2% of the amount of taxes otherwise required to be deposited
and
- The deposit shortfall is paid or deposited by the shortfall
makeup date as described next.
Makeup date for deposit shortfall:
- Monthly schedule depositor. Deposit or pay the
shortfall or pay it with your return by the due date of the Form
941-SS (or 943) for the period in which the shortfall occurred. You
may pay the shortfall with your return even if the amount is $2,500 or
more.
- Semiweekly schedule depositor. Deposit by the
earlier of the (1) first Wednesday or Friday
(whichever comes first) that comes on or after the 15th of the month
following the month in which the shortfall occurred or (2)
the return due date for the period in which the shortfall occurred.
For example, if a semiweekly schedule depositor has a deposit
shortfall during February 2001, the shortfall makeup date is March 16,
2001 (Friday). However, if the shortfall occurred on the required
April 4 (Wednesday) deposit date for a March 30 (Friday) pay date, the
return due date for the March 30 tax liability (April 30) would come
before the May 16 (Wednesday) shortfall makeup date. In this case, the
shortfall must be deposited by April 30.
Employers of Both Farm and Nonfarm Workers
If you employ both farm and nonfarm workers, you must treat
employment taxes for the farmworkers ( Form 943 taxes) separately from
employment taxes for the nonfarm workers (Form 941-SS taxes). Form 943
taxes and Form 941-SS taxes are not combined for purposes of applying
any of the deposit rules.
If a deposit is due, deposit the Form 941-SS taxes and Form 943
taxes separately, as discussed next.
How To Deposit
The two methods of depositing employment taxes are discussed next.
See Payment With Return on page 9 for exceptions explaining
when taxes may be paid with the tax return instead of deposited.
Electronic deposit requirement.
You must make electronic deposits of all depository taxes (such as
employment tax, excise tax, and corporate income tax) using the
Electronic Federal Tax Payment System (EFTPS) in 2001 if:
- The total deposits of such taxes in 1999 was more than
$200,000 or
- You were required to use EFTPS in 2000.
If you are required to EFTPS and fail to do so, you may be subject
to a 10% penalty. If you are not required to use EFTPS, you may
participate voluntarily. To get more information or to enroll in
EFTPS, call 1-800-555-4477 or 1-800-945-8400.
Depositing on time.
For deposits made by EFTPS to be on time, you must initiate the
transaction at least one business day before the date the deposit is
due.
Making deposits with FTD coupons.
If you are not making deposits by EFTPS, use Form 8109,
Federal Tax Deposit Coupon, to make
the deposits at an authorized financial institution.
For new employers, the IRS will send you a Federal Tax Deposit
(FTD) coupon book 5 to 6 weeks after you receive an employer
identification number (EIN). (Apply for an EIN on Form SS-4.) The IRS
will keep track of the number of FTD coupons you use and
automatically will send you additional coupons when you
need them. If you do not receive your resupply of FTD coupons, call
1-800-829-1040. You can have the FTD coupon books sent to a branch
office, tax preparer, or service bureau that is making your deposits
by showing that address on Form 8109-C, FTD Address Change,
which is in the FTD coupon book. (Filing Form 8109-C will not change
your address of record; it will change only the address where the FTD
coupons are mailed.) The FTD coupons will be preprinted with your
name, address, and EIN. They have entry boxes for indicating the type
of tax and the tax period for which the deposit is made.
It is very important to clearly mark the correct type of tax and
tax period on each FTD coupon. This information is used by the IRS to
credit your account.
If you have branch offices depositing taxes, give them FTD coupons
and complete instructions so they can deposit the taxes when due.
Please use only your FTD coupons. If you use anyone else's FTD
coupon, you may be subject to the failure to deposit penalty. This is
because your account will be underpaid by the amount of the deposit
credited to the other person's account. See Deposit Penalties
later for details.
How to deposit with an FTD coupon.
Mail or deliver each FTD coupon and a single payment covering the
taxes to be deposited to an authorized depositary. An authorized
depositary is a financial institution (e.g., a commercial bank) that
is authorized to accept Federal tax deposits. Follow the instructions
in the FTD coupon book. Make the check or money order payable to the
depositary. To help ensure proper crediting of your account, include
your EIN, the type of tax (e.g., Form 941-SS), and tax period to which
the payment applies on your check or money order.
Authorized depositaries must accept cash, a postal money order
drawn to the order of the depositary, or a check or draft drawn on and
to the order of the depositary. You may deposit taxes with a check
drawn on another financial institution only if the depositary is
willing to accept that form of payment.
Note:
Be sure that the financial institution where you make deposits
is an authorized depositary. Deposits made at an unauthorized
institution may be subject to the failure to deposit penalty.
Depositing on time.
The IRS determines whether deposits are on time by the date they
are received by an authorized depositary. To be considered timely, the
funds must be available to the depositary on the deposit due date
before the daily cutoff deadline. However, a deposit received by the
authorized depositary after the due date will be considered timely if
the taxpayer establishes that it was mailed in the United States
(including U.S. Territories) at least 2 days before the due date.
If you hand deliver your deposit to the depositary on the due date,
be sure to deliver it before the depositary closes its business day.
Note: If you are required to deposit any taxes more
than once a month, any deposit of $20,000 or more must be made by its
due date to be timely.
Depositing without an EIN.
If you have applied for an EIN but have not received it,
and you must make a deposit, make the deposit with the IRS. Do
not make the deposit at an authorized depositary. Make it
payable to the "United States Treasury" and show on it your name
(as shown on Form SS-4), address, kind of tax, period covered, and
date you applied for an EIN. Send an explanation with the deposit.
Do not use Form 8109-B, Federal Tax Deposit
Coupon, in this situation.
Depositing without Form 8109.
If you do not have the preprinted Form 8109, you may use Form
8109-B to make deposits. Form 8109-B is an over-the-counter FTD coupon
that is not preprinted with your identifying information. You may get
this form by calling 1-800-829-1040. Be sure to have your EIN ready
when you call. You will not be able to obtain this form by calling
1-800-TAX-FORM.
Use Form 8109-B to make deposits only if--
- You are a new employer and you have been assigned an EIN,
but you have not received your initial supply of Forms 8109 or
- You have not received your resupply of preprinted Forms
8109.
Deposit record.
For your records, a stub is provided with each FTD coupon in the
coupon book. The FTD coupon itself will not be returned. It is used to
credit your account. Your check, bank receipt, or money order is your
receipt.
How to claim credit for overpayments.
If you deposited more than the right amount of taxes for a quarter,
you can choose on Form 941-SS for that quarter to have the overpayment
refunded or applied as a credit to your next return. Do not ask the
depositary or EFTPS to request a refund from the IRS for you.
Deposit Penalties
Penalties may apply if you do not make required deposits on time.
The penalties do not apply if any failure to make a proper and timely
deposit was due to reasonable cause and not to willful neglect. For
amounts not properly or timely deposited, the penalty rates are:
| 2% |
- |
Deposits made 1 to 5 days late. |
| 5% |
- |
Deposits made 6 to 15 days late. |
| 10% |
- |
Deposits made 16 or more days late. Also applies to
amounts paid within 10 days of the date of the first notice the IRS
sent asking for the tax due. |
| 10% |
- |
Deposits made at an unauthorized financial institution,
paid directly to the IRS, or paid with your tax return (but see
Depositing without an EIN earlier for exceptions).
|
| 10% |
- |
Amounts subject to electronic deposit requirements but
not deposited using the Electronic Federal Tax Payment System
(EFTPS). |
| 15% |
- |
Amounts still unpaid more than 10 days after the date
of the first notice the IRS sent asking for the tax due or the day on
which you receive notice and demand for immediate payment, whichever
is earlier. |
Order in which deposits are applied.
Generally, tax deposits are applied first to any past due
undeposited amount, with the oldest liability satisfied first.
However, you may designate the period to which a deposit applies if
you receive a penalty notice. You must respond within 90 days of the
date of the notice. Follow the instructions on the notice you receive.
For more information, see Revenue Procedure 99-10, 1999-1 C.B.
272.
Example:
Cedar Inc. is required to make a deposit of $1,000 on May 15 and
$1,500 on June 15. It does not make the deposit on May 15. On June 15,
Cedar Inc. deposits $1,700 assuming that it has paid its June deposit
in full and applied $200 to the late May deposit. However, because
deposits are applied first to past due underdeposits in due date
order, $1,000 of the June 15 deposit is applied to the late May
deposit. The remaining $700 is applied to the June 15 deposit.
Therefore, in addition to an underdeposit of $1,000 for May 15, Cedar
Inc. has an underdeposit for June 15 of $800. Penalties will be
applied to both underdeposits as explained above. However, Cedar may
contact the IRS within 90 days of the date of the notice to request
that the deposits be applied differently.
Trust fund recovery penalty.
If income, social security, and Medicare taxes that must be
withheld are not withheld or are not deposited or paid to the United
States Treasury, the trust fund recovery penalty may apply. The
penalty is the full amount of the unpaid trust fund tax. This penalty
may apply to you if these unpaid taxes cannot be immediately collected
from the employer or business.
The trust fund recovery penalty may be imposed on all persons who
are determined by the IRS to be responsible for collecting,
accounting for, and paying over these taxes, and who acted
willfully in not doing so.
A responsible person can be an officer or employee of a
corporation, a partner or employee of a partnership, an accountant, a
volunteer director/trustee, or an employee of a sole proprietorship. A
responsible person also may include one who signs checks for the
business or otherwise has authority to cause the spending of business
funds.
Willfully means voluntarily, consciously, and
intentionally. A responsible person acts willfully if the person knows
the required actions are not taking place.
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