What is IRS Publication 931: Deposit Requirements For Employment Taxes

IRS Publication 931: Deposit Requirements For Employment Taxes is a document published by the Internal Revenue Service (IRS) that instructs employers on how to deposit withheld Social Security, Medicare and income taxes for their employees. The deposit instructions in IRS Publication 931 do not cover federal unemployment tax.

BREAKING DOWN IRS Publication 931: Deposit Requirements For Employment Taxes

IRS Publication 931 is not a tax form, but it provides instructions for employers to complete IRS Form 941, which accompanies withholding deposits. Employer withholding of employment tax liabilities remains a bedrock principle of tax codes around the world, since any system that relied on employees to make their own tax payments would inevitably result in missed payments and expensive collection efforts by the government. By engaging employers in the tax withholding process, governments are assured of receiving at least a rough estimate of the tax revenue due from income. In the U.S., at the end of the calendar year employees receive IRS Form W-2, which details the withholding amounts paid on their income to federal, state and local tax authorities. After filing a tax return, the taxpayer could owe more or less than what has been withheld; the amount is reconciled with either a refund to the taxpayer or a bill for taxes owed.

Publication 931 Has Two Deposit Schedules

Publication 931 explains that employers must use one of the two employment tax deposit schedules: semi-weekly or monthly. The deposit schedule selected is based on the amount of tax liability reported during a lookback period, which is four calendar-year quarters beginning on July 1 of the year preceding the previous year. For example, the lookback period for withholding taxes to be collected in 2018 begins on July 1, 2016 and ends on June 30, 2017.

Employers use the monthly deposit schedule if their total tax liability in the lookback period was $50,000 or less. Payment is due on the 15th day of the month after the month in which the paychecks were issued. Employers use the semi-monthly schedule if their total tax liability was over $50,000. In that case, payments are due on the Wednesday following payroll days falling on Wednesday, Thursday or Friday; or on the Friday following payroll days falling on Sunday, Saturday, Monday or Tuesday.

For a new employer, the income for the lookback year is considered zero, thus new companies automatically fall under the monthly payment schedule for the first year, so long as their tax liability in any month is under $100,000.

The $100,000 Rule

The so-called $100,000 Rule in Publication 931 says that if any employer deposits $100,000 or more in tax withholding for any payroll period, the IRS payment is due on the next business day. Moreover, at that point the employer must immediately switch to the semi-weekly payment plan for the rest of the year and the following calendar year.