What Is IRS Notice 931? Deposit Schedules and Penalties

IRS Notice 931 is an informational publication the IRS sends employers to explain federal tax deposit requirements for employment taxes. It is not a bill, not a penalty, and not a sign that something is wrong with your account. It tells you which deposit schedule applies to the income tax, Social Security, and Medicare taxes you withhold from employee paychecks, and when those deposits are due. Reading it carefully matters because the IRS holds employers to every rule in it, and depositing late or in the wrong way triggers penalties that climb fast.

What Notice 931 Is and Isn’t

The IRS describes Notice 931 as a notice that “informs taxpayers of their federal tax deposit requirements for quarterly Form 941 and annual Forms 943, 944, 945 and CT-1.”¹ Think of it as a reference sheet. It lays out the two deposit schedules, explains how to figure out which one applies, and covers special rules like the next-day deposit threshold.²

It applies to any employer who withholds federal income tax and FICA taxes from employees, whether you file quarterly on Form 941 or annually on Forms 943, 944, 945, or CT-1. If you got it in the mail, the IRS isn’t accusing you of anything. It’s handing you the rules.

One reason to take the rules seriously: the amounts you withhold are classified as trust fund taxes. The IRS puts it plainly — these amounts are “part of their wages you pay to the Treasury instead of to your employees” and are “held in trust until they are paid to the Treasury.”³ That designation opens the door to personal liability if the money goes unpaid, which is covered further down.

Which Deposit Schedule Applies to You

Every employer is assigned one of two schedules, monthly or semiweekly, based on a lookback period. Getting this right is the single most effective thing you can do to stay out of penalty territory.

The Lookback Period

For Form 941 filers, the lookback period is the 12-month window from July 1 of two years ago through June 30 of the prior year. For calendar year 2026, that means July 1, 2024, through June 30, 2025.² Add up the total tax liability reported on all four Forms 941 filed during that window. That total determines your schedule for the whole year.

Monthly Depositors

If the lookback total was $50,000 or less, you deposit monthly. Taxes accumulated during a month are due by the 15th of the following month.² Taxes withheld from January paychecks are due by February 15, and so on.

Semiweekly Depositors

If the lookback total was more than $50,000, you deposit semiweekly, and the deadline depends on which day of the week you pay employees:⁴

Payday on Wednesday, Thursday, or Friday: deposit by the following Wednesday.
Payday on Saturday, Sunday, Monday, or Tuesday: deposit by the following Friday.

Semiweekly depositors always get at least three business days between payday and the deposit deadline. A federal holiday inside that window pushes the deadline to the next business day.

The $100,000 Next-Day Rule

If you accumulate $100,000 or more in employment tax liability on any single day, the entire amount is due by the close of the next business day, no matter which schedule you were on. Hitting this threshold also flips you to semiweekly for the rest of the current year and all of the following year.⁴ A monthly depositor with a large payday can trip this rule without warning.

The $2,500 Small Liability Exception

If your total employment tax liability for the quarter is less than $2,500, you can skip separate deposits and just pay the full amount when you file your Form 941.⁵ The same break applies if the prior quarter was under $2,500 and you haven’t tripped the $100,000 rule. Cross back above the threshold and the regular deposit rules return.

How You Must Pay

Federal tax deposits must be made by electronic funds transfer. The usual route is the Electronic Federal Tax Payment System (EFTPS).⁶ Same-day wire payments through your bank and payments through an authorized payroll provider also qualify. Mailing a check does not.

Plan ahead if you aren’t already enrolled. After you sign up, the IRS mails a personal identification number to your address of record, which takes five to seven business days.⁷ Running out the clock on EFTPS enrollment is a weak excuse for a missed deposit.

Paying the IRS some other way (sending a check directly, for example) triggers a 10% penalty on the amount even if it arrives on time. The IRS treats this as failing to deposit in the required manner.⁸

What Late or Wrong Deposits Cost

The Failure to Deposit penalty under 26 U.S.C. § 6656 is tiered by how many days late you are. It applies to the underpayment — the gap between what you owed and what you deposited on time.⁹

1 to 5 days late: 2%
6 to 15 days late: 5%
More than 15 days late: 10%
Still unpaid 10 days after the IRS sends its first delinquency notice: 15%

The jump from 10% to 15% isn’t about additional time passing. It’s about the IRS formally notifying you and you still not paying. A deposit 20 days late and one 90 days late both sit at 10% until that delinquency clock starts.

Interest runs on top of the penalty. For the first quarter of 2026 the underpayment interest rate was 7% per year, compounded daily, dropping to 6% starting April 1, 2026.¹⁰ Interest keeps accruing until tax, penalty, and interest are all paid.¹¹

The Safe Harbor for Small Shortfalls

A small deposit shortfall is forgiven. No penalty applies if the amount you fell short is within the greater of $100 or 2% of the required deposit.⁵ If you owed $10,000 and deposited $9,800, the $200 gap is covered. You still have to make the shortfall up: semiweekly depositors by the first Wednesday or Friday on or after the 15th of the month following the month the deposit was due, monthly depositors by the return due date. Miss that makeup deadline and the safe harbor stops protecting you.

Getting a Penalty Removed

If an FTD penalty has already landed on you, two paths lead to relief without a formal appeal.

First-Time Abatement

The IRS offers an administrative waiver called First-Time Abatement (FTA) for employers with a clean record. You qualify if you’ve filed the same return type for the prior three tax years, received no penalties during those three years (or had any removed for a reason other than FTA), and have no more than three prior FTD penalty waivers in that window.¹²

Reasonable Cause

Section 6656 itself waives the penalty when the failure “is due to reasonable cause and not due to willful neglect.”⁹ Reasonable cause means you exercised ordinary business care but genuinely couldn’t comply. Natural disasters, serious illness of the person responsible for deposits, destruction of records, or bank processing errors can qualify. Being busy or unfamiliar with the rules does not.

Document everything. Insurance claims and FEMA declarations for a flood. Written confirmation from your bank for a transfer failure. Vague assertions without evidence rarely succeed.

You must request abatement within the refund statute of limitations: three years from the return due date or two years after you paid the penalty, whichever is later.

When Owners Become Personally Liable

If employment taxes go completely unpaid, the IRS can look past the business. The Trust Fund Recovery Penalty (TFRP) is assessed against individuals and equals the full amount of unpaid trust fund taxes — the income tax withheld plus the employee share of Social Security and Medicare.¹⁵ It is a dollar-for-dollar assessment, not a percentage.

Two things must be true. The person has to be “responsible,” meaning they had authority over which creditors got paid. Officers, directors, owners, and anyone with check-signing authority are typical targets. The failure also has to be “willful,” which does not require bad intent. Awareness of the unpaid taxes plus intentional disregard or plain indifference is enough. Paying rent or vendors while knowing payroll taxes are overdue is the textbook example.¹⁵

The TFRP can be assessed against several people at once.¹⁶ It follows the person, not the business, generally survives bankruptcy, and has no cap. If deposits are already slipping, this is the exposure to take seriously.

What to Do After Receiving Notice 931

Since the notice is informational, treat it as a checklist rather than a crisis.

Confirm your deposit schedule. Run the lookback calculation and make sure it matches what the IRS expects. A mismatch here is one of the most common causes of accidental late deposits.
Verify your EFTPS enrollment. If you aren’t enrolled, start now. The five-to-seven business day PIN wait becomes a problem on deadline day.
Reconcile recent deposits against your most recent Form 941. The safe harbor gives a cushion, but only if you make up the shortfall on time.
Calendar your deadlines. Semiweekly depositors in particular have deadlines that shift with payday.
Watch the $100,000 threshold. A single large payday for a monthly depositor can trigger next-day deposit treatment and flip you to semiweekly for the rest of the year and all of the next.

If a separate notice has already assessed an FTD penalty, pay the underlying tax quickly to stop the penalty from escalating to the next tier. Then look at whether First-Time Abatement or reasonable cause fits before paying the penalty itself. Paying the penalty doesn’t waive your right to seek abatement afterward, but the clock still runs: generally three years from the return due date or two years from when you paid, whichever is later.

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Internal Revenue Service. About Notice 931, Deposit Requirements for Employment Taxes
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Internal Revenue Service. Notice 931 – Deposit Requirements for Employment Taxes
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Internal Revenue Service. Trust Fund Taxes
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Internal Revenue Service. Topic No. 757, Forms 941 and 944 – Deposit Requirements
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eCFR. 26 CFR 31.6302-1 – Deposit Rules for Taxes Under the Federal Insurance Contributions Act (FICA) and Withheld Income Taxes
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Internal Revenue Service. Depositing and Reporting Employment Taxes
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Electronic Federal Tax Payment System. Electronic Federal Tax Payment System Home
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Internal Revenue Service. Internal Revenue Manual 20.1.4 – Failure to Deposit Penalty
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Office of the Law Revision Counsel. 26 USC 6656 – Failure to Make Deposit of Taxes
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Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026
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Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges
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Internal Revenue Service. Administrative Penalty Relief
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Internal Revenue Service. Instructions for Form 843 – Claim for Refund and Request for Abatement
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Internal Revenue Service. Employment Taxes and the Trust Fund Recovery Penalty (TFRP)
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Internal Revenue Service. Internal Revenue Manual 5.7.3 – Establishing Responsibility and Willfulness for the Trust Fund Recovery Penalty (TFRP)