Payroll remittance is the process of sending withheld employee taxes and employer-owed taxes to the IRS and state agencies on a set schedule. For federal purposes, each deposit bundles income tax withholding, both halves of Social Security and Medicare, and, separately, federal unemployment tax. The IRS assigns you either a monthly or semiweekly deposit schedule, and missing a deadline by even one day triggers an automatic percentage penalty. In the worst cases, the IRS can bypass the business entirely and collect the unpaid trust fund portion from owners and officers personally.
What Goes Into Each Deposit
Federal income tax withheld from employee paychecks is usually the largest piece. The amount shifts with each payroll based on W-4 elections and gross wages.
FICA is next. Employers and employees each pay 6.2% of wages for Social Security and 1.45% for Medicare, for a combined 15.3% split evenly.1Office of the Law Revision Counsel. 26 USC Code 3101 – Rate of Tax Social Security applies only to the first $184,500 of an employee’s wages in 2026; after that, you stop withholding and matching the 6.2% for the rest of the year.2Social Security Administration. Contribution and Benefit Base Medicare has no wage cap.
An Additional Medicare Tax of 0.9% starts once an employee’s wages cross $200,000 in a calendar year. You begin withholding it in the pay period that crosses the line. There is no employer match on this one.3Internal Revenue Service. Topic No. 560, Additional Medicare Tax
FUTA is paid by the employer only. It applies to the first $7,000 of each employee’s wages. The base rate is 6.0%, and employers who pay state unemployment taxes on time receive a credit of up to 5.4%, which brings the effective rate to 0.6%, or $42 per employee per year.4Internal Revenue Service. Topic No. 759, Form 940 – Employers Annual Federal Unemployment (FUTA) Tax Return The credit shrinks in states with outstanding federal unemployment loans. For 2026, California and the U.S. Virgin Islands face potential credit reductions.5PayrollOrg. California and Virgin Islands May Face Credit Reduction for 2026
Most states also require income tax withholding, and several add employer contributions for disability or paid family leave programs. Those are handled through separate state portals with their own deadlines.
Your Deposit Schedule and When Payments Are Due
The IRS assigns every employer a monthly or semiweekly schedule based on a lookback period covering July 1 through June 30 of the prior year. If your total Form 941 liability during that window was $50,000 or less, you are a monthly depositor. Anything above $50,000 puts you on the semiweekly schedule.6Internal Revenue Service. Topic No. 757, Forms 941 and 944 – Deposit Requirements
Monthly depositors owe all taxes accumulated during a calendar month by the 15th of the following month.7Internal Revenue Service. Notice 931 – Deposit Requirements for Employment Taxes
Semiweekly depositors follow a schedule tied to payday:
- Payday on Wednesday, Thursday, or Friday: deposit due the following Wednesday.
- Payday on Saturday, Sunday, Monday, or Tuesday: deposit due the following Friday.6Internal Revenue Service. Topic No. 757, Forms 941 and 944 – Deposit Requirements
A third rule overrides both. If you accumulate $100,000 or more in tax liability on any single day, that amount is due by the next business day.8Internal Revenue Service. Employment Tax Due Dates Once you hit that threshold, you are reclassified as a semiweekly depositor for the rest of the calendar year and the following year. Large bonus payrolls are the common trigger.
FUTA runs on its own calendar. If accumulated FUTA liability exceeds $500 in a quarter, deposit it by the last day of the month following that quarter. If it is $500 or less, carry the balance forward until it crosses the threshold.9Internal Revenue Service. Instructions for Form 940
How to Submit the Payment
Federal payroll tax deposits must be made electronically. Most employers use the Electronic Federal Tax Payment System (EFTPS), a free Treasury service. Payments scheduled through EFTPS or the IRS voice response system must be submitted by 8:00 p.m. ET the day before the due date to count as timely.10Electronic Federal Tax Payment System. Electronic Federal Tax Payment System The funds leave your bank account on the settlement date you choose, so the balance has to be there on that day.
In EFTPS you enter your EIN, select the tax type and period, and enter the amount. The system returns an acknowledgment number for each transaction. Save it. That number is your proof of timely deposit if a discrepancy shows up later.11Electronic Federal Tax Payment System. Electronic Federal Tax Payment System Financial Institution Handbook The IRS also accepts payments through IRS Direct Pay, your IRS business tax account, or a same-day wire arranged through your bank for genuinely last-minute situations.
State agencies run separate portals with their own logins, account numbers, and due dates. Payroll software typically covers both, but treat each system as its own obligation with its own confirmation trail.
What It Costs to Be Late
The IRS calculates the failure-to-deposit penalty on the calendar days a deposit is late. The rates are not cumulative; you pay the single applicable rate, not the lower ones stacked underneath:12Internal Revenue Service. Failure to Deposit Penalty
- 1 to 5 days late: 2% of the unpaid deposit.
- 6 to 15 days late: 5% of the unpaid deposit.
- More than 15 days late: 10% of the unpaid deposit.
- After the IRS issues a notice demanding payment and 10 days pass without payment: 15% of the unpaid deposit.13Office of the Law Revision Counsel. 26 USC 6656 – Failure to Make Deposit of Taxes
Penalty relief is possible on a reasonable-cause showing, meaning ordinary care and prudence but a circumstance like a natural disaster, serious illness, or a system failure that blocked electronic payment. The IRS decides these case by case.14Internal Revenue Service. Penalty Relief for Reasonable Cause Cash shortages, a vendor’s error, and not knowing the deadline do not qualify. First-time offenders may get administrative relief without proving reasonable cause, so it is worth asking.
When the IRS Can Come After You Personally
Federal income tax withholding and the employee share of FICA are trust fund taxes: money collected on behalf of employees and the government. If a business fails to hand those funds over, the IRS can pursue any “responsible person” individually for the full amount under Section 6672 of the Internal Revenue Code.15Office of the Law Revision Counsel. 26 USC 6672 – Failure to Collect and Pay Over Tax
A responsible person is anyone with authority to decide which bills get paid: owners, officers, partners, and sometimes bookkeepers or payroll managers with check-signing authority. The Trust Fund Recovery Penalty equals 100% of the unpaid trust fund taxes. It is a personal assessment for the entire amount, not a surcharge on top of the business debt, and the IRS can assess it against multiple responsible persons at once and collect from whoever has reachable assets.
The IRS has to show two things: that you were a responsible person and that your failure was willful. Willful does not require criminal intent. It is enough that you knew the taxes were due and used the money elsewhere, such as paying rent or vendors. When a business is short on cash and choosing which creditors to satisfy, paying anyone else ahead of trust fund taxes is the textbook definition of willful failure.16Internal Revenue Service. Trust Fund Recovery Penalty (TFRP) Overview and Authority The TFRP does not cover the employer share of FICA or FUTA; only the trust fund portion.
The Returns That Close the Loop
Depositing on time is only half of the job. You also have to file returns that reconcile what you deposited against what you owed.
Form 941 is the main quarterly return. It reports total wages, federal income tax withheld, and both shares of Social Security and Medicare, then compares the calculated liability to the deposits you already made.17Internal Revenue Service. Form 941 – Employers Quarterly Federal Tax Return If deposits and liability do not match, the IRS bills the difference.
Very small employers whose total annual liability for Social Security, Medicare, and withheld income tax is $1,000 or less can file Form 944 once a year instead. You cannot choose this on your own; the IRS notifies you, or you contact them to request it.18Internal Revenue Service. About Form 944, Employers Annual Federal Tax Return
FUTA gets its own annual return, Form 940, due January 31. If you deposited all FUTA on time during the year, you get an extra 10 days to file.9Internal Revenue Service. Instructions for Form 940 State agencies have parallel quarterly wage reports and unemployment filings. Missing those can jeopardize the FUTA credit and raise your effective federal rate.
How Long to Keep Payroll Records
Keep all employment tax records for at least four years after the fourth-quarter return for that year is filed.19Internal Revenue Service. Employment Tax Recordkeeping That means filed returns, deposit dates and amounts, EFTPS acknowledgment numbers, and the underlying payroll data. Four years is the floor. If an underpayment slipped through, the assessment window may still be open, and many accountants recommend six or seven years as a working buffer.