Reminder of Semi-weekly Deposit Requirements

Below is a sample of a notice the IRS is sending out to employers whose 941 deposit requirements have changed.  The original notices are sent at the end of each year if a change will occur the following year.  However, the IRS will also send out a reminder notice if they suspect you are not observing the new requirements.  Our sampling shows; If an employer whose deposit requirements recently changed has not deposited any current year 941 taxes by the end of January, the IRS will send a reminder notice to them to remind them of the new requirements.  It is not a bill and does not specifically mean taxes were paid late.  However, it could be important.

The notice is related to your Federal 941 Tax Deposit frequency requirements which are different from your payroll frequency you chose to issue checks to employees. Federal deposit frequencies are when the tax payments are due (Monthly, Semi-Weekly or Next-Day).  Generally new employers are required to deposit 941 taxes to the IRS on a Monthly schedule.  However, this monthly deposit requirement isn't set in stone forever. 

Example: With a semi-weekly deposit frequency; if your payroll was dated 2/01/16 for instance; the 941 taxes for that payroll would be due by Friday 2/5/16.  With a monthly deposit frequency; the taxes for that same payroll dated 2/01/16 would not be due until 3/15/16.

Rule of thumb: the more money you owe, the faster the IRS wants you to pay it.  For instance, if an employer accumulates a 941 liability greater than $50,000 in the 4 quarter look-back period; the employer will be required to deposit taxes to the IRS on a semi-weekly frequency (3-4 days of each check date) as opposed to 15 days after the month end.  The 4 quarter look-back period for 2016 would reference all 941 liabilities from July 1, 2014 - June 30, 2015.  

Deposit requirements typically only change at the start of a calendar year; however, if you have accumulated more than $100,000 in 941 liabilities then you would be required to pay those taxes the Next-Day.  If such an event were to occur, your frequency going forward would also change to that of a semi-weekly depositor regardless of the time of year.

What do I need to do?  If you are a client of ASAP, please share a copy with us so that we may review.  It is important.  However, it doesn't necessarily mean anything is wrong.  ASAP monitors each employer's deposit schedule requirements in accordance with the look-back history of prior 941 liabilities and auto-adjusts each calendar year to insure compliance.  Based on our sampling; we suspect the IRS automatically will send the reminder notice to employers if they have not deposited current year taxes by the end of January.  While certainly helpful to the general public; this overlooks a small sampling of employers that may process only one payroll per month on or near the last business day of the month whose 941 liabilities aren't due until early the following month.

Example: if you only run payroll once at the end of each month say 1/29/16; your tax deposit under the semi-weekly frequency would be due 2/3/16.

If you are NOT a client of ASAP's, you should review your payroll tax payments with whomever is in charge of submitting and filing your payroll tax returns.  IRS penalties are steep.  A 941 deposit penalty for a semi-weekly depositor generally could cover the costs of our services for a year or more.