Understanding Payroll Tax Deposit Rules as a Small Business

All employers need to familiarize themselves with payroll tax deposit rules. Making these payments to the federal government are part of your responsibilities as an employer. You also must file the correct reporting and informational returns. Another duty as an employer includes providing your employees and/or contractors with W-2 or 1099 reports. These reports explain any paid compensation and detail what was withheld.

On top of knowing your state’s requirements, you may find that the rules are hard to keep track of. For newer businesses, they may even be difficult to understand. However, the IRS can slap employers with big noncompliance penalties. Using a payroll software system can help you to navigate these guidelines while also avoiding any costly oversights.



What Are Payroll Tax Deposit Rules?

The IRS is known for two things: its rules and its expectation of businesses strictly adhering to them. As you complete your company’s payroll tax deposits, remember the following rules:

Electronic Filing – Businesses must electronically file federal tax deposits. The only exception is for small businesses with a federal tax liability per quarter of less than $2,500. Employers can use four methods to transmit their electronic tax payments. These methods are:

  • Using the free Electronic Federal Tax Payment System (EFTPS). The Treasury Department runs the free online or voice response system.
  • Asking your financial institution to initiate an ACH Credit payment.
  • Asking a tax professional or a payroll service to make the payment on your behalf. However, if you opt to manage your payroll in-house, you wouldn’t go that route.
  • Requesting that your financial institution makes a same-day tax wire payment on your behalf. You would only make that request in extraordinary circumstances.

Periodic Returns – Depositing your federal payroll taxes was never going to be the end of it. Another one of the payroll tax deposit rules is that employers must file periodic returns as well. These returns show the way that you computed your tax liabilities.

Stay Up to Date – You may experience significant changes with your business over time. If you close the business, you can end your requirement to file the quarterly returns. Similarly, you can end your obligation if you cease paying wages that require you to submit payroll taxes. To bring an end to these returns, mark the return for the last quarter as a “final” return. You simply need to check a box at the top of the form.

Maintain Records – Once you make your payroll tax deposits, you must maintain your records. You must keep records for at least four years past the date you paid your taxes or the due date of the return. It depends on which date falls later. Review the record-keeping requirements for your specific state.


How Advanced Micro Solutions Can Help

Our users can meet the necessary payroll tax deposit rules with our software. They can record state and federal tax deposit information. Users can also record any disbursements. Our payroll reporting lets you export data to our W-2 and 1099 Filer for processing at the end of the year.


Software Solutions from AMS

Our W-2 and 1099 Forms Filer is our only required platform. From there, users pick the services they need. Choose from the tools below to build out your customized accounting software.