What it means
Every employer that pays wages holds tax on behalf of the government. That money includes income tax withheld from employees plus both the employee and employer shares of social security and Medicare, and it must be paid over on a strict schedule rather than whenever the payroll team gets round to it.
The guidance explains how an employer's deposit schedule is set. In general, a business looks back at the total employment tax it reported over a defined earlier period, and that figure decides whether it is a monthly depositor or a semiweekly depositor.
A small payroll usually lands on the monthly schedule, while a larger one moves to the faster semiweekly schedule. Under a monthly schedule, deposits are generally due by the fifteenth day of the following month.
Under the semiweekly schedule, the due date depends on the day of the week the wages were paid: wages paid on Wednesday, Thursday or Friday are generally deposited by the following Wednesday, and wages paid on Saturday, Sunday, Monday or Tuesday by the following Friday. Very large liabilities can trigger a next-day deposit rule, so the guidance should be read in full by anyone running a sizeable payroll.
A point worth knowing is that the formal title is a notice rather than a numbered publication, and many people still call it Pub 931. If you search the tax authority's website for the notice number, you will find the same guidance, reissued from time to time with updated details.
Late or short deposits attract penalties that rise with the delay, and responsible individuals in the business can be held personally liable for unpaid withheld tax. For a founder or finance lead, the safest habit is to automate the deposit and to reconcile it every payroll against the payroll register.
In practice
Real-world examples.
Example
A 15-person coffee roastery pays staff on the last Friday of each month and is classed as a monthly depositor. Its payroll provider calculates the liability and the deposit is made before the fifteenth of the next month. The finance manager keeps the confirmation record with the monthly payroll file.
Example
A fast-growing logistics start-up with a large weekly payroll is classed as a semiweekly depositor. Its Friday pay run means the deposit is due the following Wednesday, and the controller sets a recurring reminder for the Monday before. She treats the deadline as seriously as a supplier payment run.
Example
A consultancy founder discovers that the business has been paying its withheld tax together with its quarterly return rather than on the deposit schedule. The late deposits have already generated penalty notices. She moves to electronic deposits, asks her accountant to request penalty relief where it is available, and adds a payroll reconciliation to the monthly close.
Formula
Calculation
Deposit due = income tax withheld + employee share of social security and Medicare withheld + employer share of social security and Medicare
Suppose a business pays wages of $40,000 in a payroll period. It withheld $4,000 of income tax from employees and $3,060 of employee social security and Medicare. The employer must add a matching $3,060 as its own share. Deposit due = 4,000 + 3,060 + 3,060 = $10,120. If this were paid late, the penalty would be charged on that $10,120 deposit, not on the $40,000 of wages.Case study
Seen in the real world.
Brightwater Staffing is an illustrative, fictional agency that placed temporary workers with local manufacturers. As it won new contracts, its payroll grew from a few thousand dollars a week to more than six figures, but nobody noticed that the growth had pushed it from the monthly deposit schedule to the semiweekly one.
For two quarters the agency kept paying its withheld tax once a month. The tax authority issued penalty notices because the deposits were late, even though every dollar was eventually paid. The owner was surprised because she had treated the tax as a monthly bill, like rent.
Her new finance manager read the deposit guidance, rebuilt the process around the semiweekly deadlines, and set up automatic electronic payments from a dedicated payroll account. The illustrative lesson is that growth can change a compliance schedule without any warning, so the deposit schedule should be reviewed whenever payroll steps up.
Watch out
Common mistakes.
- Treating employment tax as something to pay with the quarterly return, when the deposits are due much sooner under the monthly or semiweekly schedule.
- Forgetting that the employer's own share of social security and Medicare must be deposited too, not just the amounts withheld from employees.
- Assuming the schedule never changes, when a business can move from monthly to semiweekly as its payroll grows.
Questions
People also ask.
How is my deposit schedule decided?
It is generally based on the total employment tax you reported in a defined lookback period, and the guidance explains the exact period and the thresholds.
How do I make the deposit?
Deposits are made electronically, either through the government's payment system or through a payroll provider that does it on the employer's behalf.
Who is personally at risk if deposits are not made?
Responsible individuals in the business, such as owners and senior finance staff, can be held personally liable for withheld tax that is not paid over.
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