Payroll Tax Deposit

Definition

A payroll tax deposit is the transfer of withheld federal income taxes, Social Security taxes, and Medicare taxes to the IRS on a schedule determined by the employer's total tax liability. Employers are classified as either monthly or semi-weekly depositors based on a lookback period, and must use the Electronic Federal Tax Payment System (EFTPS) to remit funds. Missing deposit deadlines is a leading cause of IRS penalties for small businesses.