Title
Janene's Story
Hi, I'm Janene.
My real estate business is doing well,
and I've been learning a lot from these lessons.
So far, I've learned about the differences
between employees and contractors,
how to manage payroll,
and information about unemployment taxes.
Now I need to know how to make tax deposits
and file a return to report my payroll taxes,
and I'm sure you have plenty of information to help me.
We sure do, Janene.
Welcome everyone to How to Make Tax Deposits
and File a Return to Report Your Payroll Taxes.
Overview
In this lesson, we'll cover...
your responsibilities for depositing taxes
and filing a return to report payroll taxes.
Specifically, we'll explain the federal tax deposit process,
deposit requirements and penalties,
and show you how to file Form 941,
Employer's Quarterly Federal Tax Return.
Making tax deposits
How often you pay these taxes depends
on the type of tax and on the amount.
But how do I know when I'm supposed to deposit the taxes?
There are a number of rules
about when to deposit your payroll taxes,
but the best time to make a tax deposit
is the same day you pay your employees.
That way, you get it done right away
without any worries about missing deadlines
or not having the money when it's due.
You can deposit anytime up through the deposit due date,
but if you deposit late, penalties will apply.
Deposit Due Dates
And what are the deposit due dates?
First, if the payroll tax is less than 25 hundred dollars
for the current quarter or the preceding quarter
and you did not incur a 100 thousand dollar
next-day deposit obligation
during the current quarter,
you can pay it with your Form 941,
Employer's Quarterly Federal Tax Return.
But you have to file on time for this rule to apply.
We'll talk more about Form 941 later.
Second, if the payroll tax is 25 hundred dollars or more
for the quarter,
your deposit is based either on a monthly
or on a semi-weekly schedule.
How do I know what deposit schedule I'm on?
How do I know what deposit schedule I'm on?
You use a specific 12-month period
called the lookback period.
Your lookback period is the 12-month period
ending on June 30th from last year.
For example, to figure out your deposit schedule
for the current year,
you need to look back to those four previous quarters
ending on June 30th of last year.
Why doesn't the IRS just look at January through December?
By looking at these quarters,
the IRS can accurately see your tax liability
for a full 12 months.
Monthly depositor
If you are a new employer and had no employees
during the lookback period,
or if all your taxes totaled 50 thousand dollars
or less for the period,
you are a monthly depositor.
If your total taxes were more than 50 thousand dollars,
you make deposits based on the semi-weekly schedule.
What does it mean to be a monthly depositor?
On this schedule...
you deposit monthly payroll taxes by the 15th day
of the following month.
If a deposit is required to be made on a day
that is not a business day,
make the deposit by the close of the next business day.
A business day is any day other than a Saturday, Sunday,
or legal holiday.
Publication 15, Employer's Tax Guide
The term "legal holiday" for deposit purposes
means any legal holiday in the District of Columbia.
Legal holidays in the District of Columbia are provided
in IRS Publication 15, Employer's Tax Guide.
Depositing and reporting are separate actions.
Even though you may pay monthly throughout the quarter,
you only file Form 941 once
at the end of the quarter.
Semi-Weekly Depositor
So then what does it mean to be a semi-weekly depositor?
Under the semi-weekly deposit schedule...
deposit employment taxes for payments made on Wednesday,
Thursday, and/or Friday
by the following Wednesday.
Deposit taxes for payments made on Saturday, Sunday,
Monday, and/or Tuesday by the following Friday.
Report of Tax Liability for Semi-Weekly Schedule Depositors
If you are a semi-weekly depositor,
you must complete Form 941 Schedule B,
Report of Tax Liability for Semi-weekly Schedule Depositors,
and submit it with Form 941.
The Schedule B has daily sections on it;
this allows you to report tax liabilities
corresponding to the dates when wages were paid.
Again, use the Schedule B to report the tax liability
and not the deposits.
$100K Next-Day Deposit Rule
Any other rules I need to know about?
Well, Janene, there is a third deposit rule.
If you accumulate 100 thousand or more dollars in taxes
on any day during a monthly or semi-weekly deposit period,
you must deposit the tax by the next business day,
whether you are a monthly or a semi-weekly schedule depositor.
Publication 15, Employer's Tax Guide
For more information
on the 100 thousand dollar next-day deposit rule,
see IRS Publication 15, Employer's Tax Guide.
Late Deposit Penalties
Why is it important to determine my deposit schedule?
It's not uncommon for a new business to run short of cash,
but don't forget that the money you hold
for your employees is not yours to spend.
You are entrusted with these funds-
that's why the penalties are so strict.
The penalties for late deposits can be a large
and unnecessary expense for your business.
In fact, businesses can fail
because they don't clearly understand
and follow the tax deposit requirements.
So, make your tax deposits on time.
Use electronic fund transfer for all federal tax deposits
Can I write a check to make deposits,
or do I have to make deposits electronically?
You must use electronic fund transfer
to make all federal tax deposits.
EFTPS: The Electronic Federal Tax Payment System
Generally, electronic fund transfers are made
using the Electronic Federal Tax Payment System,
or EFTPS.
EFTPS is a free service provided by the Department of Treasury.
EFTPS is safe, secure, and available 24/7
over the internet or by telephone.
For more information, click on the EFTPS logo
on the homepage of www.irs.gov
or go directly to the EFTPS Website
EFTPS
at www.eftps.gov.
Publication 966
Additional information about EFTPS is also available
in IRS Publication 966,
Electronic Federal Tax Payment System:
A Guide to Getting Started.
If you do not want to use EFTPS,
you can arrange for your tax professional,
financial institution, payroll service,
or other trusted third party
to make deposits on your behalf.
Services provided by your tax professional,
financial institution, payroll service,
or other third party may have a fee.
Reporting Payroll Taxes
So now that I've learned how to calculate
and deposit withholding taxes,
how do I file a return to report my payroll taxes?
Each calendar quarter, almost all employers
who pay wages subject to tax withholding
must file Form 941,
Employer's Quarterly Federal Tax Return.
There are some employers, however,
who do not need to file Form 941 quarterly.
If you are a seasonal, household,
or agricultural employer,
there are publications that may help you.
Go to www.irs.gov
and enter those terms in the search box
to find more information.
Payroll Reporting Requirements
Now, let's look at the payroll reporting requirements
for the majority of small businesses
by taking a closer look at Form 941.
You use Form 941 to report wages paid
and the taxes due on those wages, quarterly.
A quarter consists of three calendar months
starting on the first day of the first month
and ending on the last day
of the last month of that quarter.
Form 941 is due
at the end of the following month.
This makes the due dates April 30th, July 31st,
October 31st, and January 31st.
In addition, if you timely deposited all taxes when due,
you have 10 additional calendar days
from the due date to file.
Also, if the due date for filing Form 941
falls on a Saturday, Sunday, or legal holiday,
it's due the next business day.
As we said earlier, depositing and reporting
are separate actions.
Even though you may pay throughout the quarter,
you only file Form 941 once at the end of the quarter.
Information you'll need to prepare Form 941
What do I need to prepare my Form 941?
Janene, you'll need a number of pieces of information
to prepare your Form 941.
Your EIN,
which we discussed in the first lesson of this workshop
The number of employees,
total wages paid-- include tips reported--
taxable fringe benefits provided,
and other forms of compensation paid to the employees
The withheld income taxes,
and this includes all income taxes withheld
from your employees including tax withheld from tips,
taxable fringe benefits,
and certain other payments
The total of all wages
subject to Social Security and Medicare taxes.
This amount includes any sick pay and taxable fringe benefits
subject to Social Security taxes.
Records of all tips.
This will be added to the wages and other compensation paid.
Always remember
to have a record of your tax deposits available
when you prepare your quarterly returns.
This information helps you
accurately report the amounts of your deposits
and the type of deposit schedule
you are required to use.
You may have paid wages but were not required
to withhold income taxes;
you'll still include those wages on Form 941.
Do not include your contributions to employee plans
that are excluded from the employees' wages
such as 401K and cafeteria plans.
Wage Base
Also, there is a limit on the amount of wages
subject to Social Security taxes,
called the wage base.
Once an employee's wages reach the wage base,
do not withhold any more Social Security tax.
The wage base may change from year to year.
IRS Publication 15 shows the current year's wage base
for Social Security taxes.
All wages paid, however, are subject to the Medicare tax.
If you owe additional taxes, however,
and the taxes owed are less than one dollar,
then you do not have to pay the amount.
If you deposited more than the correct amount for a quarter,
you can choose on Form 941 for that quarter
to have the overpayment refunded
or applied as a credit to your next return.
A responsible party must sign Form 941
Form 941 must be signed by a responsible party.
If the business is sole proprietorship,
the return must be signed by the owner of the business;
if a partnership or unincorporated organization,
by a responsible and duly authorized member, partner,
or officer having knowledge of its affairs;
if a corporation, by the president, vice-president,
or other principle officer duly authorized to sign.
Form 941 may also be signed
by a duly authorized agent of the taxpayer
if a valid power of attorney has been filed.
In addition, you may designate someone else
to discuss the Form 941 with the IRS
by completing the third-party designee section of the form.
For instance, if the IRS has a question,
you may want us to contact your accountant.
Penalties and Interest
There is a penalty for filing a late Form 941 return.
There are also deposit penalties for making late deposits
and for not depositing the proper amount.
In addition, there are penalties for willful failure
to file returns and to pay taxes when due,
for filing false returns, and for submitting bad checks.
Then, interest is charged on the total of unpaid tax
and the penalty.
Information about Your Notice, Penalty and Interest
For more information on penalties and interest,
we encourage you to review Notice 746,
Information about Your Notice Penalty and Interest.
Correcting Employment Taxes
Correcting Employment Taxes
What if I made a mistake?
Janene, it's easy to correct employment taxes.
Go to www.irs.gov,
enter "correcting employment tax"
in the search box,
and then click on that link.
This will lead to the Correcting Employment Taxes page
where you can download the Form 941 X, Form 943 X,
or Form 944 X as well as the instructions
on how to correct the errors.
Employers can submit the correction
as soon as they discover an error
and in the case of an overpayment,
select to apply the overage to the next quarter
or request a refund.
Filing Options
How can I file my returns?
Can I file them electronically?
There are options for filing Form 941
and in fact, most forms with the IRS.
You can electronically file or mail a paper return.
Let's take a closer look at the electronic option.
You can file electronically through an authorized,
third-party transmitter using the Form 941
online filing program.
Approved IRS e-file for Business Providers
The IRS Website, www.irs.gov,
has a list of Approved IRS e-file
for Business Providers
and e-file for Business Partners
who offer Form 941 online filing.
Return preparation and filing is easy.
You visit the provider's secure Website
and enter the information needed
to complete your employment tax return.
The tax is calculated for you
and your return is filed online
using the service of the Form 941
online filing provider.
You sign electronic returns
by using a personal identification number, or PIN.
Within 48 hours, the IRS sends an official acknowledgement
that your return was received.
If you owe money,
you can authorize an electronic funds withdrawal
from your checking or savings account
or use a credit card to pay your taxes.
However, do not use an electronic funds withdrawal
or a credit card to make federal tax deposits.
Lesson Summary
These lessons have been a great help to me-
I finally feel I know what I'm supposed to do.
Before we finish, though, can I have a review of this one?
Janene, we are glad we could help.
In this lesson...
we discussed the basics of making tax deposits
and filing a return to report payroll taxes.
Specifically, we talked about due dates for tax deposits,
how to determine if you are a monthly
or semi-weekly depositor,
and making deposits electronically.
We also discussed reporting payroll taxes on Form 941
as well as filing Form 941 electronically.
Don't forget to consult IRS Publication 15,
Employer's Tax Guide, if you need more information.
You can also go
to www.irs.gov/smallbiz
and click on "Filing/Paying Taxes"
in the left navigation bar.
Thanks for joining us for this lesson.
Best wishes on your business.