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Monthly tax deposit issue

I work for a small nonprofit and our quarterly payroll tax obligation hovers around the $2500 liability limit for making monthly tax deposits. Since I never know if I'm going to be above or below the $2500 mark, I've been making monthly tax deposits for the past couple of years. But last month I was out of the country and making the monthly deposit (by Feb 15) slipped my mind. This would have been the first monthly payment of the quarter.

Pub 15 states that a business may make quarterly payments if "Your Form 941 total tax liability for either the current quarter or the prior quarter is less than $2,500, and you didn't incur a $100,000 next-day deposit obligation during the current quarter." My prior quarter is just below the $2500 mark - does that mean I'm OK if I don't make monthly tax deposits this quarter even if this quarter's liability goes over the $2500 mark? And would you recommend going ahead and making a 2-month deposit in this month, or would that raise a red flag and I should just wait and make the entire quarterly payment with my 941? I don't know if this quarter's liability total will be over or under the $2500 mark.



  • Maybe you are over thinking this. Computers do not care about "red flags". IRS computer is going to look at your liabilities and deposits. If your deposits fail to cover your liabilities, IRS's computer is going to ding you. If your deposits cover your liabilities, IRS's computer will not ding you. It is very unlikely an actual person will waste any time on this anyway.

  • Thanks David. I'm not sure I agree with your assessment that computers don't care about "red flags" - in my experience that's actually what they're trained to do. Whenever I get some notice about a discrepancy, it's obvious that it was something oddball that kicked off something in a computer's system that wouldn't have been caught by a human. That said, I agree that I may be over thinking this. But I've had some weird interactions with the IRS around this monthly/quarterly issue and just thought I'd look for some advice before diving in. I appreciate you taking the time to comment. :)

  • d26k
    d26k ✭✭✭

    If you have never been late before, do not worry, deposit now if it makes you feel better. The odds of getting a nasty gram are low, given the dollar amount, and that you likely have never been in collections before. Me? I deposit every time, no matter the requirement. There is little interest to be gained floating, it is not my money anyway, and I do not have to worry about depositing "on time".

  • The prior quarter rule was not always there and was instituted because employers would get dinged when they first went over $2,500 in a quarter. If you have not been penalized in the past few years for late deposit, you fall within the exception. I would go ahead and make three deposits for the quarter, that way, if a penalty is proposed, it will be minimized. If the prior quarter exception does not apply, you should be able to get relief under the reasonable cause defense or, if that fails, the first time forgiveness exception.