Understanding Form 941 Deposit Schedules and Tax Liability 

reading time: 13 minute(s)

Filing Form 941 can feel a bit tricky, but understanding the deposit schedule and tax liability can make the filing easier. Being an employer, it’s important to know how to determine the business’s deposit schedule and tax liability. 

To make filing easier than ever, we are breaking down the difference between deposit schedules and taking a look at what exactly tax liability is! 

Before understanding the deposit schedule, you must know about the LookBack Period

LookBack Period

If you are filing Form 941, your deposit schedule is determined based on the lookback period. The lookback period refers to the timeframe used by the IRS to determine an employer’s tax liability. It begins on July 1 and ends June 30.

For example, if you determine the deposit schedule for 2024, your look-back period falls from July 1, 2023 to June 30, 2024.

What is a deposit schedule?

Employers must promptly deposit employment taxes according to their schedules, as determined by Form 941. To avoid penalties, ensure you pay any owed amount in full with your return and deposit it by the due date.
Here are the tax liabilities that determine the deposit schedule. 

• Tax liability under $2,500: If the total tax liability for the current quarter is less than $2,500, you can pay the taxes while filing Form 941. You don’t have to make deposits separately if you do not incur a $100,000 next-day deposit obligation during the current quarter.
• Tax liability of $2,500 or more: When the tax liability goes beyond $2,500, you have to make tax deposits. There are two different types of deposit schedules – Monthly and Semiweekly. It is determined by your employment taxes during the lookback period.

Types Of Deposit Schedules

Remember, Deposit schedules will not be the same for all employers, it might vary depending on the prior tax filings. Here are the types of deposit schedules

Monthly Deposit Schedule

If your employment tax liability during the lookback period is less than $50,000, you are a monthly depositor.

Due Date: Taxes must be deposited by the 15th of the following month. Example: January taxes are due by February 15.

Note: If you are a new employer, you become a monthly schedule depositor automatically.

Semi-Weekly Deposit Schedule

If your employment tax liability is $50,000 or more, you are a semi-weekly depositor.

Due Date:

• Payday on Wednesday, Thursday, or Friday – Deposit by the next Wednesday.
• Payday on Saturday, Sunday, Monday, or Tuesday – Deposit by the next Friday.

Next-Day Deposit Rule

If you accumulate $100,000 or more in taxes on any day, you must deposit the amount by the next business day.

Due date: Next business day.

How to deposit employment taxes?

You can use EFTPS (Electronic Federal Tax Payments System) to deposit employment taxes securely with TaxBandits. TaxBandits offers an EFTPS payment option for making your tax payments, ensuring tax compliance with ease.

What are the deposit penalties?

If you fail to deposit your employment taxes, the IRS will incur penalties for the deposits made late. Here are the penalties listed below:

Penalty Rate	Deposit delay
2%	1 to 5 days
5%	6 to 15 days
10%	More than 16 days
10%	Paid to the IRS or paid with your return
15%	More than 10 days after the first IRS notice

How do the deposit schedule and tax liability apply to Form 941?

When filing Form 941, a business’s deposit schedule and tax liability are reported in Part 2. There are three deposit schedule options on Line 16 of Form 941.

Check the first box on line 16 if:

• Line 12 on the return is less than $2,500 or, if line 12 on the return for the previous quarter was less than $2,500, and a $100,000 next-day deposit obligation wasn’t incurred during the current quarter. 

Check the Second box on line 16 if:

• The business was a monthly schedule depositor for the entire quarter.If this option is selected, the filer is instructed to fill out the tax liability for each month. The total liability of the three months must equal the amount on Line 12 of Form 941.

Check the third box on line 16 if:

• The business was a semiweekly schedule depositor for any part of the quarter. If this option is selected, the filer is instructed to complete 941 Schedule B. The total liability reported on 941 Schedule B must equal the amount on Line 12 of Form 941.

TaxBandits has an easy E-file solution for Form 941!

Form 941 can be easily e-filed with the IRS using TaxBandits! 

Our e-filing process is simple and streamlined. Built-in error checks using the IRS Business Rules and automatic tax calculations make filing easier than ever. You can easily complete Form 941 Schedule B during the e-filing process as well.

Get started with TaxBandits today by creating your free account!