How payroll taxes reach the IRS

Payroll taxes move from your business bank account to the IRS through a system called the Electronic Federal Tax Payment System (EFTPS), or through your tax professional or payroll service if you use one. You do not mail a check to the IRS for payroll taxes — the IRS requires electronic payment for nearly all employers. The payment itself is straightforward once you know the amount owed and the important date, but the timing and frequency depend on how much you pay in taxes each quarter and what the IRS calls your deposit schedule.

The IRS sets deposit important date based on when you withheld the taxes from employee paychecks, not when you paid employees. This means you may owe a deposit before payday arrives. Most small businesses deposit monthly or semi-weekly. Large employers deposit more often. Missing a deposit important date costs you a penalty even if you pay the full amount later.

Key Takeaways

  • The IRS requires electronic payment through EFTPS, a payroll service, or your tax professional — not by check or mail.
  • Deposit important date depend on your deposit schedule (monthly or semi-weekly for most businesses) and when taxes were withheld, not when employees were paid.
  • You calculate the amount owed by adding federal income tax withheld, employee Social Security and Medicare taxes, and your employer share of Social Security and Medicare.
  • The IRS sends a notice called Form 941-V if you owe taxes, but you do not wait for it to deposit — you deposit on the important date whether or not you receive notice.
  • Penalties explore if you miss a deposit important date, even if you pay the full amount within a few days.

Understanding your deposit schedule

The IRS assigns you a deposit schedule based on how much payroll tax you reported in the prior four quarters. The two schedules are monthly and semi-weekly. A monthly schedule means you deposit all taxes withheld during a calendar month by the 15th of the following month. A semi-weekly schedule means you deposit taxes withheld during certain days by a specific day two or three days later.

The IRS determines your schedule automatically based on Form 941 (Employer's Quarterly Federal Tax Return), which you file each quarter. If you reported $50,000 or less in taxes during the lookback period (usually the prior four quarters), you are on a monthly schedule. If you reported more than $50,000, you move to a semi-weekly schedule. The IRS notifies you of your schedule in a letter, but you can also find it on your IRS online account or ask your payroll service.

If you are a new employer, the IRS places you on a monthly schedule until you have filed enough quarters to calculate your lookback amount. Some employers move between schedules year to year depending on their tax liability.

Calculating the amount you owe

The amount you deposit includes three components: federal income tax withheld from employee paychecks, employee Social Security and Medicare taxes withheld, and your employer share of Social Security and Medicare taxes. You do not deposit state or local taxes through EFTPS — those go to your state and local tax agencies on their own schedules.

Most payroll software calculates this total for you automatically. If you run payroll manually, you add up the federal income tax you withheld from each employee paycheck during the deposit period, plus 6.2% of each employee's gross wages (up to the annual wage cap) for Social Security, plus 1.45% of gross wages for Medicare. Then you add your employer share: 6.2% for Social Security (same wage cap) and 1.45% for Medicare. The wage cap for Social Security changes each year — the IRS publishes it in January.

Your payroll records should show these amounts broken down by employee and pay period. If you use a payroll service, ask them to provide a deposit summary showing the total amount due and the important date.

Making a payment through EFTPS

EFTPS is a free system run by the U.S. Department of the Treasury. To use it, you must enroll first, which takes about a week. You can enroll online at eftps.gov or by phone at 1-800-555-3453. The IRS will mail you a Personal Identification Number (PIN) after you enroll.

Once enrolled, you log in to eftps.gov, enter your Employer Identification Number (EIN), select the tax type (941 for payroll taxes), enter the amount and the tax period, and choose a payment date. EFTPS lets you schedule a payment up to 120 days in advance. The payment must clear your bank account by the deposit important date — if you schedule it for the important date date itself, it may not clear in time, so most employers schedule for one or two days before.

After you submit a payment, EFTPS gives you a confirmation number. Keep this number for your records. The payment typically leaves your bank account within one business day.

Using a payroll service or tax professional

If you use a payroll service like ADP, Gusto, or Paychex, the service usually deposits taxes on your behalf as part of the payroll package. You authorize the service to withdraw the deposit amount from your bank account on the important date. The service handles the EFTPS login and submission, and you receive a confirmation from them.

If you work with a tax professional or accountant, they may also handle deposits for you. Ask them whether they will submit deposits or whether you are responsible. Some professionals submit only quarterly returns and leave deposits to you.

Using a service does not change your legal responsibility for the deposit. If the service misses a important date, you still owe the penalty. Confirm with your service what happens if there are insufficient funds in your bank account on the deposit date, and make sure your account has enough money before the important date arrives.

Deposit important date for monthly and semi-weekly schedules

On a monthly schedule, you deposit taxes withheld during the entire calendar month by the 15th of the following month. For example, taxes withheld in January are due by February 15. If the 15th falls on a weekend or federal holiday, the important date moves to the next business day.

On a semi-weekly schedule, the important date depends on which days you paid employees. Taxes withheld on Wednesday, Thursday, and Friday are due the following Wednesday. Taxes withheld on Saturday, Sunday, Monday, and Tuesday are due the following Friday. This means you may have two or three deposits per month instead of one.

The IRS publishes a deposit schedule calendar each year showing the exact important date for each pay period. You can find it on irs.gov or ask your payroll service for a copy. Mark these dates in your calendar or set a reminder — missing even one important date triggers a penalty.

What happens if you miss a deposit important date

The IRS charges a penalty if you deposit late, even by one day. The penalty is a percentage of the unpaid taxes: 2% if you deposit one to five days late, 5% if you deposit six to 15 days late, and 10% if you deposit more than 15 days late. You also owe interest on the unpaid taxes from the original important date date.

If you realize you will miss a important date, deposit as soon as possible and contact the IRS to explain. The IRS may reduce or waive the penalty if you have a reasonable cause (such as a bank error or a death in your family) and you have a history of timely deposits. Request penalty relief in writing to the IRS office that issued the penalty notice.

If you cannot deposit the full amount by the important date, deposit what you can. The IRS prefers a partial late payment to no payment. You will still owe a penalty on the unpaid portion, but depositing something shows good faith.

Reconciling deposits with your quarterly return

Every quarter, you file Form 941 (Employer's Quarterly Federal Tax Return) with the IRS. This form reports the total federal income tax, Social Security tax, and Medicare tax you withheld and paid during the quarter. The total of all your deposits for that quarter should match the total on Form 941.

If your deposits do not match Form 941, the IRS will notice and may send you a notice asking for an explanation or payment. This often happens if you made an error calculating a deposit, missed a deposit, or made an extra deposit by mistake. Review your deposit records and your payroll records to find the discrepancy.

If you deposited more than you owed, the IRS will credit the overpayment to your next quarter's taxes or refund it if you request it on Form 941. If you deposited less, you owe the difference when you file Form 941.

Frequently Asked Questions

Do I need to enroll in EFTPS if I use a payroll service?

No. If your payroll service handles deposits, you do not need an EFTPS account. The service submits payments on your behalf using its own EFTPS enrollment. Ask your payroll service whether they handle deposits or whether you are responsible.

What if my bank account does not have enough money on the deposit important date?

The payment will fail and you will be considered late. The IRS charges a penalty even if the failure was due to insufficient funds. Contact your bank when ready to resolve the issue, then deposit as soon as funds are available. Notify the IRS in writing if you believe you have a reasonable cause for the late deposit.

Can I pay payroll taxes by check or mail?

No. The IRS requires electronic payment for nearly all employers. The only exception is if the IRS has granted you a waiver, which is rare. Always use EFTPS, a payroll service, or a tax professional.

How do I know if I am on a monthly or semi-weekly deposit schedule?

The IRS notifies you by mail when you first register for an EIN. You can also check your IRS online account (irs.gov), call the IRS at 1-800-829-1040, or ask your payroll service. Your deposit schedule may change each year based on your prior four quarters of tax liability.

What if I deposited the wrong amount by mistake?

If you deposited too much, the IRS will credit it to your next quarter or refund it when you file Form 941. If you deposited too little, you owe the difference when you file Form 941. Either way, correct the error on your quarterly return and the IRS will reconcile it. You may also owe interest on any underpayment.