Federal Payroll Tax Deposits

Every time you run payroll, you owe the IRS the federal income tax you withheld plus both halves of Social Security and Medicare tax. A federal tax deposit is how you send that money in, and the rules on when and how are strict. The timing depends on a test called the lookback period, which sorts employers into monthly or semiweekly depositors for the year.

The two deposit schedules

The terms describe when deposits are due, not how often you pay employees. A business that pays staff once a month can still be a semiweekly depositor if its lookback taxes were high enough, and a business that pays weekly can be a monthly depositor.

A new business is treated as having zero taxes in the lookback period, so it is a monthly depositor for its first calendar year. The exception is the $100,000 rule below.

The lookback period

For a Form 941 filer, the IRS adds up the total tax shown on line 12 of the four Forms 941 in the lookback period. For 2026 those are the quarters from July 1, 2024 through June 30, 2025. The same pattern shifts forward a year at a time, so the 2027 lookback period is July 1, 2025 through June 30, 2026.

Employers who file Form 944 (the annual return) use a different lookback: the second calendar year before the current one. For 2026, that is calendar year 2024. Our Form 941 guide explains who files the annual form.

Example. A company reported $12,000 of tax on each quarter's Form 941 in the lookback period, for a total of $48,000. It is a monthly depositor in 2026. If the total had been $51,000, it would be a semiweekly depositor.

The $100,000 next-day rule

If you accumulate $100,000 or more in taxes on any day within a deposit period, you must deposit by the next business day. This applies whether you are a monthly or a semiweekly depositor. A monthly depositor who hits $100,000 becomes a semiweekly depositor starting the next day and stays on that schedule for the rest of that year and the following year.

This most often catches businesses that pay a large bonus, a big commission run or a year-end payout.

Business days and holidays

If a deposit is due on a Saturday, Sunday or legal holiday, it is timely if made by the next business day. For federal deposits, a "legal holiday" means a legal holiday in the District of Columbia, so DC Emancipation Day on April 16 counts but ordinary statewide holidays do not. Semiweekly depositors always get at least three business days after the end of the period, so a holiday in that window adds a day. Our deadlines calendar shows the shifted dates through 2027.

How to deposit

All federal tax deposits must be made by electronic funds transfer. The free options are the IRS Electronic Federal Tax Payment System (EFTPS), IRS Direct Pay for businesses, and your IRS business tax account. You can also have a payroll provider or tax professional make the deposits for you, and that may involve a fee. Paying with a check, a credit card or an electronic funds withdrawal does not satisfy the deposit rule.

Keep the confirmation number from each deposit. If you use a payroll provider, ask to see deposit confirmations from time to time instead of assuming everything went through.

Paying with the return instead

You may skip separate deposits and pay with a timely filed Form 941 if your total tax for either the current or the prior quarter is under $2,500 and you did not hit the $100,000 rule. Monthly depositors can also pay a small shortfall with the return under the IRS accuracy of deposits rule. If you are unsure whether the quarter will stay under $2,500, deposit under the normal rules to avoid a penalty.

What happens if you are late or short

The failure-to-deposit penalty rises with how late the deposit is: 2% for 1 to 5 days, 5% for 6 to 15 days, and 10% for more than 15 days. A higher rate of 15% applies if the tax is still unpaid more than 10 days after the first IRS notice. The tiers replace each other and do not add together. See our guide to the failure-to-deposit penalty and the broader payroll tax penalties and relief page.

How we can help

We can confirm your deposit schedule each January, set up deposit calendars, reconcile deposits against Forms 941, and work with the IRS on a penalty notice. If you want payroll handled end to end, see our payroll services or the overview in payroll tax basics.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.