Federal Tax Deposit

A Federal Tax Deposit is a payment made by an employer (or business) to the Internal Revenue Service (IRS) for federal employment taxes that include income tax withheld from employees' pay, Social Security tax, Medicare tax, and the employer’s share of these taxes. These deposits must be made on a specific schedule (monthly or semiweekly) using the Electronic Federal Tax Payment System (EFTPS).

Key Facts

• What’s Included:
  
  • Federal income tax withheld from employee wages
  • Social Security tax (employee + employer share)
  • Medicare tax (employee + employer share)
  • Additional Medicare tax (employee-only portion on high earnings)
• Deposit Schedules:
  
  • Monthly: If you reported $50,000 or less in employment taxes in the lookback period.
  • Semiweekly: If you reported more than $50,000.
• $100,000 Next-Day Rule: If an employer accumulates $100,000 or more in employment tax liability on any day, a deposit must be made by the next business day, regardless of their usual schedule.
• Payment Method: All federal tax deposits must be made electronically through the Electronic Federal Tax Payment System (EFTPS).
• Reporting: Employers report tax liability and deposits on Form 941 (quarterly) or Form 944 (annually, for eligible small businesses). Late deposits may result in penalties and interest.
• Applies to Most Employers: Any business with employees is generally required to withhold and deposit taxes regularly.

1. What is a federal tax deposit?

It’s a required payment of employment taxes (withholding + FICA) that employers must send to the IRS - typically on a monthly or semiweekly basis.

2. How do I know my deposit schedule?

Your deposit schedule is based on your lookback period (usually a prior 12-month window of tax liability) and is either monthly or semiweekly.

3. How do I make a federal tax deposit?

You must use the eFTPS (Electronic Federal Tax Payment System), which is free and secure. Deposits cannot be mailed or made by check.

4. What happens if I don’t make a deposit on time?

You may incur IRS penalties (ranging from 2% to 15% depending on how late the deposit is) and interest charges.

5. Are self-employed people required to make federal tax deposits?

Not typically. Self-employed individuals pay estimated taxes quarterly using Form 1040-ES, not through the federal deposit system.