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Federal tax deposit


Withholding taxes from employee wages while filing tax returns is a key function of any payroll service. Sending those withholdings to the Internal Revenue Service is a federal tax deposit.  As spelled out in the Federal Insurance Contributions Act (FICA), that amount includes Social Security, Medicare, federal income, and unemployment taxes. Your federal tax deposit obligation, also known as a total payroll tax liability, is the minimum amount your employees are required to pay in federal payroll taxes as reported on IRS Form 941.

Businesses submitting federal tax deposits use IRS Form 8109, also known as a Federal Tax Deposit Coupon. In the past this could be done at a bank or financial institution, but the IRS now strongly encourages businesses to submit deposits electronically via the Electronic Federal Tax Payment System.  Your federal tax deposit schedule is determined by the amount of your tax payment. Payments are generally due either annually, quarterly, monthly, or semi-weekly.  Deposit due dates differ for a small business compared to a large corporation, with smaller businesses paying on a less frequent basis.

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