by Christopher Giles, CPA
The frequency of your federal payroll tax deposits for social security, medicare and income taxes is determined annually based on a four-quarter “lookback period.” For 2003, you must calculate the total taxes reported on Forms 941 for the four-quarter period July 1, 2001 through June 30, 2002. If you reported $50,000 or less of taxes during the lookback period, you are a monthly depositor; if you reported more than $50,000, you are a semiweekly depositor.
Under the monthly deposit schedule, your deposit period is the calendar month. The deposit of accumulated federal employee and employer taxes is due by the 15th day of the following month.
The deposit periods for semiweekly schedule depositors are based on paydays Wednesday through Friday and Saturday through Tuesday. The deposits of accumulated taxes are due on the following Wednesday and the following Friday, respectively.
If your deposit is due 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.
If you accumulate a tax liability of $100,000 or more on any day during a deposit period, you must deposit the tax by the next banking day, whether you are a monthly or semiweekly schedule depositor. If you are a monthly schedule depositor, and accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and for the following calendar year.
Penalties for failure to deposit taxes timely range from 2% to 10% of the liability depending on the number of days the deposit is late.
The two methods of depositing employment taxes are making deposits with Form 8109 – Federal Tax Deposit (FTD) coupons and electronic deposits using the Electronic Federal Tax Payment System (EFTPS).
If you use FTD coupons, you must mail or deliver each FTD coupon and a single payment covering the taxes to be deposited to an authorized depositary. Authorized payments include cash, a postal money order drawn on and to the order of the depositary, or a check or draft drawn on and to the order of the depositary. An authorized depositary is a financial institution (i.e, commercial bank) that is authorized to accept the FTD coupon.
If your total deposits of employment taxes exceeded $200,000 in calendar year 2001, or you were required to use EFTPS in 2002, you must make electronic deposits using EFTPS in 2003. Amounts subject to electronic deposit requirements but not deposited using EFTPS are subject to a 10% penalty. To obtain more information or to enroll in EFTPS, call 1-800-555-4477 or 1-800-945-8440, or visit the EFTPS website at www.eftps.gov. If you need any assistance, please contact us.