Frank R. Knight, C.P.A.

 

Payroll Deposit Rules

 

IRS DEPOSIT RULES: Under IRS deposit rules, employers are either classified as a MONTHLY or SEMI-WEEKLY depositor. Employers determine their deposit status based upon the aggregate amount of employment taxes paid during the "lookback period," a twelve-month period beginning July 1 of the second preceding year and ending June 30 of the prior year. For 2005, the "lookback period" is July 1, 2003, through June 30, 2004.

SEMI-WEEKLY DEPOSIT RULE: The total tax reported on Forms 941 during the "lookback period" is more than $50,000. Employers must deposit on Wednesday and/or Friday, depending on what day of the week they make payments. Employers with payment days that fall on Wednesday, Thursday, and/or Friday must deposit the accumulated taxes on or before the following Wednesday. Employers with payment days that fall on Saturday, Sunday, Monday, and/or Tuesday must deposit the accumulated taxes on or before the following Friday. Employers will always have three (3) banking days after the end of a semi-weekly period to make a deposit. If any of the three weekdays after the end of a semi-weekly period is a banking holiday, employers will have one additional banking day to deposit.

MONTHLY DEPOSIT RULE: The total tax reported on Forms 941 during the "lookback period" is $50,000 or less. Employers must deposit employment taxes and taxes withheld on payments made during a calendar month by the 15th day of the following month.

(Employers that accumulate $100,000 or more on any day (see $100,000 one-day deposit rule www.irs.gov) must immediately switch from a monthly depositor to a semi-weekly depositor for at least the remainder of the calendar year and for the following calendar year.)