A federal tax deposit refers to the taxes that are withheld from the wages of employees and are deposited to the Internal Revenue Service (IRS) when they are due. When employers withhold taxes from their employees and appropriately deposit them to the IRS, they are essentially making a federal tax deposit.
What is the meaning of Federal Tax Deposit Obligation?
Federal tax obligation refers to the minimum amount of federal payroll taxes that employees must pay. The specific amount of federal tax obligation is dictated by the Federal Insurance Contributions Act, more popularly known as FICA.
Federal tax obligation is made of federal income tax, Medicare tax, Social Security tax, and federal unemployment tax. All employees, whether full-time, part-time, or seasonal, are required to give the minimum amount withheld from their wages.
Additionally, employers also have a federal tax deposit obligation. This refers to the aggregate payroll tax liability that is reported on IRS Form 941.
Form 941 is submitted to the IRS every quarter. The due date for Form 941 is the last day of the month following the end of the quarter. While the submission of Form 941 is quarterly, payroll tax deposits are made throughout the quarter, either on a monthly or semi-monthly basis.
What is the meaning of a Federal Tax Deposit Coupon?
The federal tax deposit coupon is also known as Form 8109. It is a form from the IRS. The federal tax deposit coupon is used by companies that meet the small business exception. This form used to be submitted along with federal payroll taxes.
However, Form 8109 is no longer accepted by the IRS since January 1, 2011. Federal tax deposit coupons cannot be used anymore by taxpayers. The IRS recommends employers use the Electronic Federal Tax Payment System (EFTPS).
How can I make Federal Tax Deposits electronically?
As of January 1, 2011, all deposits are made electronically. Most taxpayers consider making federal tax deposits electronically the most convenient, secure, and easiest payment method. There are several ways which taxpayers can do this:
EFTPS. The Electronic Federal Tax Payment System (EFTPS) is a free service from the U.S. Department of Treasury. Quick and secure, EFTPS is available online via the website or phone through a voice response system, 24 hours a day and 7 days a week. It also allows payments to be scheduled up to a year in advance. Taxpayers can go to www.eftps.gov. They can also deposit by phone using 1-800-555-3453. Please note that for an EFTPS deposit to be on time, the deposit must be scheduled by 8 PM Eastern Standard Time one day before the deposit is due.
ACH credit payments. Banks can set up ACH payments upon a taxpayer’s request.
Same-day wire. Financial institutions can conduct same-day wire for federal tax deposits. However, this depends on availability, cost, and cut-off times.
Taxpayers are required to make federal tax deposits on or before the due date. Certain penalties may apply for any of the following reasons:
If the federal tax deposit is late.
If the amount deposited is less than what is due.
If the payment is mailed directly to the IRS instead of depositing the amount.
When should I make Federal Tax Deposits?
Deposits should be made on or before the due date. The two deposit schedules are typically monthly and semiweekly. The due date for depositing social security, Medicare, and withheld federal income taxes will depend on the amount of tax obligation.
For new employers, they will have a monthly schedule for the first calendar year of business. For those who make federal tax deposits every month, they should deposit taxes from all pay periods in a month by the 15th of the following month. This is standard even if employers pay their employees weekly.
For a semiweekly schedule, for wages that were paid on Saturday, Sunday, Monday, or Tuesday deposit on the following Friday. For wages that were paid on Wednesday, Thursday, or Friday deposit by the following Wednesday.
Here are other points to remember:
The deposit rules are based on when the wages are paid and not when they are earned. For example, an employer with a monthly deposit schedule with wages earned in March but paid in April must deposit on May 15.
If the due date of deposit falls on a Saturday, Sunday, or a legal holiday, it is okay to deposit by the close of the next business day.
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