Payroll Tax Deposits: EFTPS Schedule, Trust Fund Taxes, and Common Mistakes

By Yarik Yarosh, CPA ·September 5, 2026 ·5 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

Federal payroll tax deposits are one of the highest-stakes compliance obligations for small business owners. The taxes withheld from employee paychecks (federal income tax, employee Social Security, and employee Medicare) are trust fund taxes. The IRS considers these funds to be held in trust for the government, and the penalties for late or missed deposits are severe: 2% for deposits 1-5 days late, 5% for 6-15 days late, 10% for 16+ days late, and 15% for amounts still unpaid 10 days after the IRS issues a demand notice. The personal liability component (the trust fund recovery penalty under IRC 6672) means the business owner can be held personally liable, even if the business is a corporation.

✓Key takeaway

Payroll tax deposit rules:

What must be deposited:
- Federal income tax withheld from employee wages
- Employee share of Social Security tax (6.2%)
- Employee share of Medicare tax (1.45%)
- Employer share of Social Security tax (6.2%)
- Employer share of Medicare tax (1.45%)
- Additional Medicare tax withholding (0.9% on wages above $200,000)
Deposit schedules (determined by Form 941 lookback period):
- Monthly depositor: Total taxes reported on Form 941 during the lookback period (July 1 - June 30 of the prior year) were $50,000 or less. Deposit by the 15th of the following month.
- Semi-weekly depositor: Total taxes during the lookback period exceeded $50,000. Deposit within 3 business days of the pay date (Wednesday-Friday paydays deposit by the following Wednesday; Saturday-Tuesday paydays deposit by the following Friday).
- Next-day depositor: If $100,000 or more accumulates in a single deposit period, deposit by the next business day.
EFTPS (Electronic Federal Tax Payment System): All federal tax deposits must be made electronically through EFTPS or through a payroll service that deposits on the employer’s behalf.
Form 941 (quarterly): Filed by the last day of the month following the quarter end (April 30, July 31, October 31, January 31). Reconciles total wages, taxes withheld, and deposits made.
Form 940 (annual FUTA): Federal Unemployment Tax Act. 6.0% on the first $7,000 of each employee’s wages, offset by state unemployment tax credit (usually 5.4%), for a net rate of 0.6%.

What happens when deposits are missed?

Hypothetical example

Round numbers. A small business owner on a monthly deposit schedule has a payroll of $30,000 for October. Federal taxes due:

Federal income tax withheld: $4,500
Employee Social Security (6.2%): $1,860
Employee Medicare (1.45%): $435
Employer Social Security: $1,860
Employer Medicare: $435
Total deposit required: $9,090

Deposit due: November 15 Deposit actually made: December 10 (25 days late)

Penalty calculation:

Days 1-5 late: 2% x $9,090 = $181.80
Days 6-15 late: additional 5% x $9,090 = $454.50
Days 16+ late: additional 10% x $9,090 = $909.00
Total penalty: $909.00 (the percentages are cumulative to the highest bracket, not added together; the 10% bracket applies because the deposit was 16+ days late)
Plus interest

If no deposit is made and the IRS issues a demand:

15% penalty: $1,363.50
Plus the trust fund recovery penalty (IRC 6672) can be assessed personally against the “responsible person” (the owner, officer, or anyone with authority over the business’s finances)

The trust fund portion (the employee’s share of income tax, Social Security, and Medicare = $6,795 in this example) is the most dangerous. It cannot be discharged in bankruptcy, and the IRS can pursue the responsible person’s personal assets to collect it.

Illustrative numbers only, not a real client and not advice for your facts.

The most common cause of payroll tax problems is cash flow. A business that collects revenue slowly but must pay employees on time may use payroll tax deposits as a short-term financing tool. This is the single most dangerous financial decision a small business owner can make. The IRS prioritizes trust fund tax collection above almost all other activities.

What are the penalties for late payroll tax deposits?

The IRS imposes graduated penalties for late payroll tax deposits: 2% if 1-5 days late, 5% if 6-15 days late, 10% if more than 15 days late, and 15% if still unpaid 10 days after the first IRS notice. These percentages apply to the unpaid deposit amount. The trust fund recovery penalty (IRC 6672) can hold owners, officers, and even bookkeepers personally liable for the employee’s share of unpaid payroll taxes, piercing the corporate veil entirely. This is one of the few tax penalties that cannot be discharged in bankruptcy.

How do I determine my payroll deposit schedule?

The IRS assigns businesses to either a monthly or semi-weekly deposit schedule based on the lookback period (the four quarters ending June 30 of the prior year). If total employment taxes during the lookback period were $50,000 or less, deposits are due monthly (by the 15th of the following month). Above $50,000, deposits follow a semi-weekly schedule (Wednesday/Friday based on payday). New businesses default to monthly. The schedule resets each calendar year. Regardless of schedule, accumulating $100,000 or more in undeposited taxes on any day triggers a next-business-day deposit requirement.

Related guides:

Trust Fund Recovery Penalty (TFRP): Personal Liability for Unpaid Payroll Taxes (IRC 6672)

What payroll tax deposits are required and when are they due?

Federal payroll tax deposits include withheld income tax plus both the employee and employer shares of FICA (Social Security and Medicare), and the deposit schedule depends on your total tax liability. Monthly depositors must deposit employment taxes by the 15th of the following month, while semi-weekly depositors must deposit by Wednesday for Saturday-Tuesday paydays and by Friday for Wednesday-Friday paydays. The IRS assigns your deposit schedule based on your lookback period liability (the four quarters ending June 30 of the prior year): $50,000 or less means monthly, over $50,000 means semi-weekly. The $100,000 next-day deposit rule applies regardless of your regular schedule. If you accumulate $100,000 or more in employment taxes on any day, you must deposit by the next business day and switch to semi-weekly status for the remainder of the year and the following year.

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Cite this page

Yarik Yarosh, CPA. "Payroll Tax Deposits: EFTPS Schedule, Trust Fund Taxes, and Common Mistakes." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/small-business-payroll-tax-deposits-eftps

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.