Tax Deposit Schedules: Understanding Your Obligations

What are Federal & State Tax Deposits?

As an employer, you are required to withhold certain taxes from your employees' wages when you pay them. These taxes typically include Federal Social Security tax, Medicare tax, and, in some cases, additional Medicare tax. Depending on your location, you may also need to withhold state income tax, unemployment tax, and other applicable taxes. These withholdings must be deposited with the appropriate federal and state agencies according to a schedule set by those agencies. These payments are called Federal & State Tax Deposits.

What Is a Tax Deposit Schedule?

The IRS provides guidance on tax deposits through the Federal Deposit Schedule, which outlines when employers must deposit payroll taxes during the year. The schedule varies based on a company’s tax liability. 

• How is a company's Federal Tax Deposit Schedule determined? 
  • The IRS determines a company's federal tax deposit schedule using a lookback period. This period is a review timeframe that helps calculate the future tax liability and deposit requirements, particularly for FICA (Social Security and Medicare taxes) and Federal Income Tax (FIT). State Unemployment Insurance (SUI), Federal Unemployment Tax (FUTA), State Income Tax (SIT), and local taxes may have different deposit schedules.
• What Type of Federal Tax Deposit Schedules exist?
  • There are two possible Federal Tax deposit schedules, Monthly & Semi-Weekly.

  • Semi-Weekly Deposit Schedule: A company is placed on a semiweekly schedule if it reported more than $50,000 in total FIT and FICA taxes during the lookback period. Depending on the pay date, the employer must deposit FIT and FICA taxes either on Friday or Wednesday following payroll processing.

  • Monthly Deposit Schedule: A company is on a monthly schedule if it reported less than $50,000 in total FIT and FICA taxes during the lookback period. For monthly depositors, FIT and FICA taxes must be remitted by the 15th of the following month.

What Is a State Tax Deposit Schedule?

A State Tax Deposit Schedule is a timeline set by a state's tax agency that determines when businesses must deposit withheld state taxes, such as state income tax, state unemployment tax, or other applicable state-specific taxes

• How is a company's State Tax Deposit Schedule determined?

• • State tax deposit schedules are determined by the state’s tax agency and are based on factors such as payroll tax liability, company size, payroll frequency, and state-specific rules. Some states also use a lookback period, similar to federal tax rules, to determine the deposit frequency. Businesses are typically notified of their deposit schedule upon registration or after a review of their tax filings. For more specific guidelines, businesses should consult their state tax agency.
• How Does My Tax Deposit Schedule Relate to My Payment Frequency?
  • Your tax deposit schedule doesn't always align directly with your payroll payment frequency. While payment frequency may determine how often taxes are withheld, the deposit schedule depends on your total tax liability as calculated in your lookback period. For instance, a company with frequent payrolls may have less frequent tax deposits, and vice versa. 
    
    

What Are the Consequences of Providing Incorrect Federal or State Information to GoCo Embedded Payroll?

Entering incorrect information—such as an incorrect address, tax schedule, or financial details—can have serious legal and financial consequences, including:

• Penalties from the IRS or state tax agencies.
• Accrual of interest on late payments.
• Possible compliance audits.

Because the IRS typically contacts businesses by mail, it’s crucial to keep your mailing address up to date. Visit this IRS link for more information on updating your address.

Can My Tax Deposit Schedule Change, and How Will I Be Notified?

• Your tax deposit schedule may change due to various factors, such as:

  • An increase or decrease in payroll tax liability.
  • The application of the $100,000 next-day deposit rule.
  • Changes in company size or payroll frequency.
  • State-specific changes or updates in tax laws.

  If your schedule changes, the IRS will notify you by mail, and your state tax agency will inform you using their preferred communication method.(Typically mail or via your state portal account)  It's important to regularly review your payroll tax obligations and stay in contact with tax authorities, especially when there are significant changes to your business or payroll.