Federal Tax Deposit
Federal Tax Deposit
What is a Federal Tax Deposit?
A Federal Tax Deposit (FTD) is a payment made by businesses to the IRS for payroll taxes, including federal income tax withholding, Social Security tax, Medicare tax, and other employer tax liabilities. Employers must deposit these taxes on a regular schedule to remain compliant with IRS regulations.
What Taxes Are Included in a Federal Tax Deposit?
Businesses use FTDs to pay several types of federal taxes, including:
- Payroll Taxes: Federal income tax withholding, Social Security tax, and Medicare tax (reported on Form 941 or Form 944).
- Federal Unemployment Tax (FUTA): Taxes under the Federal Unemployment Tax Act (FUTA) (reported on Form 940).
- Excise Taxes: Certain businesses must deposit excise taxes, reported on Form 720.
- Corporate Income Taxes: Businesses making estimated tax payments use FTDs.
How to Make a Federal Tax Deposit
Employers and businesses must use the Electronic Federal Tax Payment System (EFTPS) to deposit federal taxes. This secure online system allows businesses to make tax payments electronically and receive instant confirmation.
Steps to deposit federal taxes:
- Register for EFTPS: Businesses must sign up at www.eftps.gov.
- Calculate Tax Liability: Determine the amount owed based on payroll, unemployment tax, or corporate tax obligations.
- Schedule Payment: Log in to EFTPS and schedule the payment before the due date.
- Receive Confirmation: The system provides a receipt for tracking and compliance.
Federal Tax Deposit Schedules
The IRS requires businesses to follow specific deposit schedules based on their tax liability:
- Monthly Depositor: Businesses with a tax liability of $50,000 or less in the past year must deposit payroll taxes by the 15th of the following month.
- Semiweekly Depositor: Businesses with a tax liability of more than $50,000 must follow this schedule:
| Payroll Date | Deposit Due Date |
|---|---|
| Wednesday, Thursday, or Friday | Following Wednesday |
| Saturday, Sunday, Monday, or Tuesday | Following Friday |
Employers must check their tax liability regularly to determine if their deposit schedule has changed.
Penalties for Late Federal Tax Deposits
Failing to deposit taxes on time can result in IRS penalties:
- 2% Penalty: Deposits made 1-5 days late.
- 5% Penalty: Deposits made 6-15 days late.
- 10% Penalty: Deposits made more than 15 days late.
- 15% Penalty: If payment is not made within 10 days of an IRS notice.
Federal Tax Deposit vs. Tax Filing
Many employers confuse tax deposits with tax filings. Here’s the difference:
| Feature | Federal Tax Deposit | Tax Filing |
|---|---|---|
| Purpose | Deposit payroll, unemployment, and corporate taxes | Report total taxes owed (Forms 941, 940, 720, etc.) |
| Frequency | Monthly or semiweekly | Quarterly or annually |
| Method | Paid through EFTPS | Filed with IRS tax forms |
How to Avoid Federal Tax Deposit Mistakes
To stay compliant and avoid penalties, businesses should:
- Set up automatic payments through EFTPS.
- Track payroll tax liabilities regularly.
- Ensure deposits are made before the deadline to avoid penalties.
- Consult a tax professional for guidance on IRS requirements.
Key Takeaways
- Federal Tax Deposits (FTDs) are required for payroll, unemployment, excise, and corporate taxes.
- Employers must deposit taxes on a monthly or semiweekly schedule.
- EFTPS is the only IRS-approved method for making federal tax deposits.
- Late deposits result in penalties ranging from 2% to 15%.
- Depositing taxes on time ensures compliance and prevents costly IRS penalties.
For more details, visit the IRS payment website.