The tax liability on a Form 941 return includes your employees' withheld federal income tax, Social Security tax, Medicare tax, and your share of Social Security and Medicare tax.

If you accumulate a liability for these taxes of $1,000 or more per quarter, you must deposit this amount by making payment to an authorized financial institution or the Federal Reserve bank for your area. Deposits are made either by Electronic Federal Tax Payment System (EFTPS) if required or by using a Form 8109, Federal Tax Deposit Coupon, which must accompany your payment. If you use the coupon, it is very important that it shows the correct employer identification number, name, and type of tax and tax period; as this information is used by the IRS to credit your account. Your check or money order should be made payable to the financial institution or Federal Reserve bank where you make your deposit, not to the IRS.

New employers who apply for an employer identification number are sent a FTD coupon book. The IRS will keep track of the number of coupons you use and will automatically send you additional FTD coupons when you need them. If necessary, the IRS will assist you in completing blank coupons, which can be used to make a deposit if you do not have pre-printed Forms 8109. For more information, call the IRS at 1-800-829-1040.

You must deposit the Form 941 taxes based on either a monthly or semi-weekly deposit schedule. Your deposit status for 1999 is based on the amount of taxes you reported on Form 941 for the period: July 1, 1997, through June 30, 1998. This is called the lookback period.

If you reported taxes of $50,000 or less on Forms 941 for the lookback period, you are a monthly schedule depositor and generally must deposit each month's Form 941 taxes on or before the 15th day of the following month. For example, taxes for January must be deposited by February 15th.

If you reported taxes of more than $50,000 for the lookback period, you are a semi-weekly schedule depositor and generally must deposit Form 941 taxes on or before Wednesday or Friday, based on the following schedule:

1. The employment taxes on payments made to your employees on Wednesday, Thursday, and/or Friday must be deposited by the following Wednesday.
2. The taxes on payments made to your employees on Saturday, Sunday, Monday, and/or Tuesday must be deposited by the following Friday.

You always have at least 3 banking days to make a deposit. If any of the 3 workdays after the end of the semiweekly period is a holiday, you have1 additional day. If you are a new employer, your taxes in the lookback period are considered to be zero. Therefore, on your first year of your business you are a monthly schedule depositor unless the $100,000 next day deposit rule applies.

Whether you are a monthly depositor or a semi-weekly schedule depositor, and you accumulate taxes of $100,000 or more on any day during a deposit period, you must deposit them on the next banking day. If this $100,000 deposit rule applies and you are a monthly schedule depositor, you become a semi-weekly depositor for the remainder of 1998 and for 1999. If the deposit due date falls on a Saturday, Sunday, or legal holiday, the deposit will be due the next banking day.

You must make electronic deposits for all depository tax liabilities that occur after December 31, 1997, if:

1. Your Medicare, Social Security, Railroad Retirement, and withheld income taxes were more than $50,000 in 1996, or
2. You did not deposit employment taxes, but you had deposits of other depository taxes (such as excise taxes) that were more than $50,000 in 1996 or 1997.

If you were required to deposit by electronic funds transfer in prior years, continue to do so in 1998. You must use the EFTPS to make electronic deposits. Even if you do not have to make electronic deposits, you may voluntarily participate in EFTPS. To enroll in EFTPS, call 1-800-945-8400 or 1-800-555-4477. For general information about EFTPS, call 1-800-829-1040.

If you are required to make deposits by electronic funds transfer and fail to do so, you may be subject to a 10% penalty. However, no penalties will be applied if you were first required to deposit electronically on or after July 1, 1997.

Refer to Publication 966 for Electronic Federal Tax Payment System information and Publication 15, Employer's Tax Guide for deposit requirements. Publications can be downloaded from this site, or ordered by calling 1-800-829-3676.

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