How to Make Federal Payroll Tax Deposits

Making federal payroll tax deposits is one of the most important compliance tasks for any business with employees. These aren't just payments; they represent funds held in trust for your employees and the government. Getting this process right is non-negotiable for avoiding steep penalties and interest. We’ll cover how to determine your schedule, use the correct system to make payments, and handle payroll tax obligations accurately from start to finish.

What Are Federal Payroll Tax Deposits?

When you run payroll, you withhold certain taxes from your employees' paychecks and also calculate taxes that you, the employer, owe. A federal payroll tax deposit is the payment of these combined amounts to the U.S. Treasury. This is separate from filing your quarterly payroll tax return (like Form 941), which reconciles what you’ve deposited with what you actually owed.

Your deposit typically includes the following:

• Federal Income Tax: The amount withheld from each employee's gross wages based on their Form W-4.
• Social Security and Medicare Taxes (FICA): This is a two-part tax. You withhold 7.65% from the employee’s pay (6.2% for Social Security up to the annual limit and 1.45% for Medicare) and you match that 7.65% with an employer contribution. Both parts are included in your deposit.
• Federal Unemployment Tax (FUTA): This is an employer-only tax. While FUTA taxes are generally deposited quarterly, they are part of your overall payroll liability.

Think of the withheld amounts as "trust fund taxes." That money never belonged to your business; you are simply a custodian who is responsible for collecting it and remitting it to the government. The IRS takes failure to remit these funds very seriously.

Determining Your Deposit Schedule

The IRS assigns you one of two deposit schedules: monthly or semi-weekly. Your schedule isn’t a choice; it’s determined by the total amount of payroll taxes you reported during a specific "lookback period."

The lookback period for any given calendar year is the four-quarter period ending on June 30 of the prior year. For example, to determine your schedule for 2024, you'd look at the taxes you reported on Forms 941 from Q3 2022, Q4 2022, Q1 2023, and Q2 2023.

The Monthly Deposit Schedule

You are a monthly depositor for the calendar year if the total payroll taxes reported during your lookback period were $50,000 or less.

• Who is it for?: Typically smaller businesses or those with lower payroll expenses.
• Deposit Due Date: Deposits are due by the 15th of the month following the month in which the wages were paid.
• Example: You run payroll on May 10th and May 24th. The combined federal tax liability from both payrolls must be deposited by June 15th. If the 15th falls on a weekend or a federal holiday, the deadline is pushed to the next business day.

The Semi-Weekly Deposit Schedule

You are a semi-weekly depositor for the calendar year if the total payroll taxes reported during your lookback period were more than $50,000.

• Who is it for?: Businesses with larger payrolls. The rules here are more complex and are tied directly to your payday, not the end of the month.
• Deposit Due Dates:
  • If your payday is on a Wednesday, Thursday, or Friday, your deposit is due by the following Wednesday.
  • If your payday is on a Saturday, Sunday, Monday, or Tuesday, your deposit is due by the following Friday.
• Example: Your company's payday is every other Friday. You pay your employees on Friday, November 3rd. The combined tax liability from that payroll must be deposited by Wednesday, November 8th.

Special Rules and Exceptions

A couple of important rules can override your standard schedule:

1. New Employers: If you're a new business without a lookback period history, you automatically start as a monthly depositor.
2. The $100,000 Next-Day Deposit Rule: This one is a big one. If your accumulated tax liability from a payroll run reaches $100,000 or more on any day during a deposit period (monthly or semi-weekly), you must deposit the tax by the next business day. If this happens, you immediately become a semi-weekly depositor for the remainder of that calendar year and for the entire following year.

How to Make the Deposit: A Step-by-Step Guide to EFTPS

Nearly all employers are required to make payroll tax deposits electronically. The system used for this is the Electronic Federal Tax Payment System (EFTPS), a free service provided by the Treasury Department. You cannot mail a check.

Step 1: Enroll in EFTPS

Before you can make a payment, you must enroll. Do this well before your first payroll tax deposit is due. Go to EFTPS.gov and complete the enrollment process. The IRS will validate your information and then mail you a Personal Identification Number (PIN) via U.S. Mail, which can take 5-7 business days to arrive. You cannot make a payment without this PIN.

Step 2: Gather Your Payment Information

To schedule a payment, you’ll need:

• Your Employer Identification Number (EIN).
• Your EFTPS PIN.
• Your EFTPS internet password (which you set up during enrollment).
• Your business bank account and routing number.
• The total tax amount you are depositing.
• The tax form you are paying for (e.g., 941/944, 940).
• The tax period (quarter and year) the deposit applies to.

Step 3: Log In and Schedule Your Payment

Once you're ready, log in to EFTPS.gov. The process is straightforward:

1. Navigate to the "Make a Payment" section.
2. Select "Tax Form 941" (for federal income, Social Security, and Medicare taxes) or another applicable form.
3. Enter your payment amount, the correct tax period, and most importantly, the settlement date. The settlement date is the day you want the funds to be withdrawn from your bank account and credited to the Treasury. This is the date that must be on or before your official deposit due date.
4. You must schedule your payment by 8:00 PM Eastern Time the day before your intended settlement date. For example, if your deposit is due Wednesday, you must schedule the payment in EFTPS no later than 8:00 PM ET on Tuesday.

Step 4: Review, Submit, and Save Your Confirmation

Carefully review all the information on the summary screen to ensure the tax form, period, and amount are correct. Once you submit the payment, EFTPS will provide an EFT Acknowledgment Number. Screenshot this, print it, or write it down. This is your proof of payment, and it is crucial for your records.

Common Mistakes and How to Avoid Them

Even with a good system, mistakes happen. Here are a few common pitfalls and how to steer clear of them.

Mistake #1: Being on the Wrong Schedule
Accidentally following a monthly schedule when you should be semi-weekly is a frequent error.
Solution: At the end of each year, review your lookback period to confirm your deposit schedule for the upcoming year. Don’t just assume it stays the same.

Mistake #2: Missing the EFTPS Cut-Off Time
Remembering to make a deposit on the due date is only half the battle. If you miss the 8:00 PM ET cut-off, your payment won't settle until the day after, making it late.
Solution: Schedule your payments as soon as you run payroll. You can set a future settlement date in EFTPS, so there’s no need to wait until the last minute.

Mistake #3: Not Accounting for Bank Holidays
EFTPS payments only process on business days according to the Federal Reserve's holiday schedule, which might differ from your company's list of paid holidays.
Solution: If your deposit due date falls on a weekend or federal holiday, the deadline shifts to the next business day. But it's always wise to check the federal holiday calendar to avoid any surprises.

Mistake #4: Late Deposits
Making late deposits triggers automatic penalties, which escalate based on how late you are:

• 1-5 days late: 2% of the unpaid tax amount.
• 6-15 days late: 5% of the unpaid tax amount.
• More than 15 days late: 10% of the unpaid tax amount.
• More than 10 days after the first IRS notice: 15% of the unpaid tax amount.

Solution: Consistency is key. Create a payroll checklist where verifying the EFTPS payment is a mandatory final step for every pay run. For first-time errors, you may be able to get penalties waived through a First Time Abate or by showing reasonable cause.

Final Thoughts

Managing federal payroll tax deposits is a core accounting function that requires diligence and attention to detail. By understanding your specific deposit schedule, using EFTPS correctly, and scheduling payments proactively, you can ensure compliance and avoid costly penalties from the IRS.

When payroll tax questions get complicated—whether it's about penalty abatement criteria under a specific IRC section or the "reasonable cause" standard—having the right information is essential. Our work often requires more than a gut feeling; it needs verification. Instead of digging through multiple IRS publications, we rely on Feather AI to ask plain-language questions and get instant, citation-backed answers directly from authoritative sources, giving us the confidence to advise and act correctly.