Payroll Tax Deposits: Rules, Frequencies, and Common Mistakes

Quick summary

Payroll tax deposits are the routine federal payments employers make for payroll-related withholding: federal income tax withheld from employees, the employee and employer portions of Social Security and Medicare (FICA), and any Additional Medicare Tax withheld. The IRS requires most deposits be made electronically through the Electronic Federal Tax Payment System (EFTPS) and imposes specific deposit schedules that depend on your prior tax history and current liabilities. Failing to follow the rules can trigger steep penalties and personal liability in severe cases (see Trust Fund Recovery Penalty).

Sources: IRS Employer’s Tax Guide (Pub. 15) and IRS Payroll Taxes overview (irs.gov). See: https://www.irs.gov/publications/p15 and https://www.irs.gov/businesses/small-businesses-self-employed/payroll-taxes

How deposit schedules are determined

The IRS uses a lookback period to assign most employers to one of two regular deposit schedules: monthly or semiweekly.

• Lookback period: the 12-month period ending the previous June 30. The tax reported during that period (as shown on Form 941) determines your deposit schedule for the following calendar year. (IRS Pub. 15)
• Threshold: If the total tax reported during the lookback period was $50,000 or less, you are a monthly depositor. If it was more than $50,000, you are a semiweekly depositor.

New employers that do not have a full lookback period generally follow simplified rules and will be given a deposit schedule when they begin filing; the IRS also uses rules for small tax liabilities that allow payment with the return.

Reference: IRS Pub. 15 and Form 941 instructions: https://www.irs.gov/forms-pubs/about-form-941

Deposit due dates and schedules (practical rules)

• Monthly depositors: Deposit accumulated taxes for a calendar month by the 15th day of the following month. For example, taxes withheld in June are due July 15.

• Semiweekly depositors: The due date depends on the day wages are paid:

• Pay days on Wednesday, Thursday, or Friday → deposit by the following Friday.

• Pay days on Saturday, Sunday, Monday, or Tuesday → deposit by the following Wednesday.

• Next-day deposit rule: If at any time your accumulated tax liability reaches $100,000 or more on any day during a deposit period, the entire tax must be deposited by the next business day. This is often called the “$100,000 next-day” rule and applies regardless of whether you are a monthly or semiweekly depositor.

• Small-tax exception: If you owe $2,500 or less when you file Form 941, you may be able to pay the amount with the return. If you owe $2,500 to $50,000, you generally must deposit by the monthly/semiweekly rules, but can deposit by the next return if specific conditions are met. Always confirm current thresholds in Pub. 15 or Form 941 instructions.

Note: Electronic deposits via EFTPS are required for almost all employers; paper checks for deposits are rarely allowed. Sign up at https://www.eftps.gov/eftps/.

Sources: IRS Payroll Taxes, EFTPS registration pages, and Pub. 15.

How to make deposits (step-by-step)

1. Calculate the amounts: federal income tax withheld, employee FICA (6.2% Social Security and 1.45% Medicare in 2025 for most wages), employer FICA match, and Additional Medicare Tax withheld (0.9% for employees above the threshold; not matched by employers). Confirm current rates in IRS guidance.
2. Determine your deposit schedule using the lookback period and current liabilities.
3. Enroll and use EFTPS (Electronic Federal Tax Payment System) to schedule or make deposits. EFTPS gives confirmation receipts and is the IRS’s required method for most employers.
4. Make timely deposits based on your schedule and pay attention to the next‑day rule when a balance spikes.
5. Keep confirmations and records for at least 4 years — many employers keep them longer for audit protection.

EFTPS: https://www.eftps.gov/eftps/

Penalties, interest, and practical consequences

Late or missed deposits trigger penalties and interest. Penalties increase with the length of the delay and can be significant. More importantly, failure to deposit trust fund taxes (employee income tax and the employee portion of FICA) can lead to personal liability for responsible persons through the Trust Fund Recovery Penalty (TFRP) and potential liens or levies.

• Interest accrues on unpaid taxes from the due date until payment.
• Penalties apply to late deposits and may be higher for repeated or intentional noncompliance. (See IRS penalty provisions and Pub. 15.)

If you receive an IRS notice about missed deposits (for example CP notices related to payroll deposits), respond quickly and retain copies of all correspondence. In many cases, you can request penalty abatement for first-time mistakes or show reasonable cause if you have a documented plan and timely remedied the issue.

Reference: IRS penalty information in Pub. 15 and the IRS website.

Common mistakes and how to avoid them

1. Misclassifying workers: Treating employees as contractors avoids withholding and deposit obligations but risks severe penalties if the IRS reclassifies them. Use IRS guidance and the common-law test; when in doubt, consult counsel or a CPA. See our guide Choosing Between Form 1099-NEC and W-2: Employee vs Contractor.

2. Wrong deposit schedule: Failing to use the lookback period can push you into the wrong deposit cadence. Check your prior-year Form 941 totals and confirm your current year schedule.

3. Missing the next‑day rule: Large payroll swings (one-time bonuses or payroll corrections) can trigger a same-or-next-business-day deposit obligation. Run a running tally during payroll weeks where big payouts occur.

4. Late EFTPS enrollment: Because EFTPS registration can take several business days, enroll well before your first required deposit.

5. Poor recordkeeping: Not keeping EFTPS confirmations, payroll registers, and Form 941 copies makes it harder to dispute penalties or show reasonable cause.

6. Cutting payroll services without checks: Outsourcing does not shift legal responsibility — the employer remains ultimately responsible for deposits and filings.

For practical steps to reduce errors, see our related pages: “How to Avoid Common Payroll Tax Filing Errors” (https://finhelp.io/glossary/how-to-avoid-common-payroll-tax-filing-errors/) and “Staying Compliant with Payroll Taxes” (https://finhelp.io/glossary/staying-compliant-with-payroll-taxes/).

Real-world examples (lessons from practice)

• Example 1: A restaurant owner I advised missed the semiweekly schedule after a leap in weekend payrolls. They were assessed penalties and interest. We established a rolling weekly worksheet and automated EFTPS uploads; penalties were later abated for reasonable cause after documentation.

• Example 2: A startup accumulated $120,000 in withheld taxes on a single payday. Because of the $100,000 next-day rule, the company owed an immediate deposit the next business day. We worked with the bank to prioritize transfers and avoided escalation by making the deposit on time.

These practical experiences show how operational controls (a payroll calendar, daily tallies during large payroll periods, and a dedicated payments person) prevent compliance failures.

Recordkeeping and audit readiness

Keep a copy of every deposit confirmation (EFTPS receipt), payroll register, Form 941 and its worksheets, W-2/W-3 copies, and any payroll tax adjustments for at least four years. During an IRS payroll or state audit, organized records shorten the audit and help reduce penalties.

See also FinHelp’s article on dealing with payroll tax debt for steps if you cannot pay on time: “Payroll Tax Debt” (https://finhelp.io/glossary/payroll-tax-debt/).

Practical checklist for every payroll period

• Confirm pay dates and the deposit due date before payday.
• Reconcile payroll register totals (federal income tax withheld + employee FICA + employer FICA + Additional Medicare Tax withheld).
• Verify EFTPS enrollment and that funds are available for electronic transfer two business days before deposit deadlines.
• Log EFTPS confirmation numbers and store PDFs in a secure folder.
• Review monthly cash flow forecasts for large upcoming payouts that might trigger the next-day rule.

Frequently asked questions (brief)

Q: Can a payroll provider make deposits for my company?
A: Yes, but the employer remains legally responsible. Use written agreements and verify the provider’s EFTPS confirmations each payroll.

Q: What if my deposit is a few days late?
A: Interest and penalties start immediately. Pay as soon as possible and consider abatement requests with documentation of reasonable cause.

Q: Are state payroll tax deposit rules the same?
A: No. State unemployment and withholding deposit rules vary. Check your state tax agency. Failure at the state level is separate from federal obligations.

Actionable next steps

1. Review your prior year Form 941 totals to confirm your current deposit schedule.
2. Enroll in or verify EFTPS access and test a deposit well before your first required payment.
3. Establish at least one internal control: daily or weekly tallies in payroll weeks; one person responsible for scheduling EFTPS deposits and storing confirmations.
4. If you’re behind, contact the IRS immediately and consult a CPA experienced in payroll tax collections.

IRS resources: Employer’s Tax Guide (Pub. 15) https://www.irs.gov/publications/p15; Payroll taxes overview https://www.irs.gov/businesses/small-businesses-self-employed/payroll-taxes; EFTPS https://www.eftps.gov/eftps/.

Disclaimer

This article is educational and does not replace individualized tax or legal advice. Rules and thresholds change periodically — confirm details in IRS Publication 15, Form 941 instructions, and authoritative IRS pages, or consult a CPA or tax attorney for your specific situation.

Sources and further reading

• IRS Employer’s Tax Guide, Publication 15: https://www.irs.gov/publications/p15
• IRS Payroll Taxes: https://www.irs.gov/businesses/small-businesses-self-employed/payroll-taxes
• EFTPS: https://www.eftps.gov/eftps/

Internal FinHelp articles referenced:

• How to Avoid Common Payroll Tax Filing Errors: https://finhelp.io/glossary/how-to-avoid-common-payroll-tax-filing-errors/
• Staying Compliant with Payroll Taxes: https://finhelp.io/glossary/staying-compliant-with-payroll-taxes/
• Payroll Tax Debt: https://finhelp.io/glossary/payroll-tax-debt/

If you’d like, I can convert this into a printable employer checklist or a short email template to give your payroll vendor. (Educational content only.)