Do you have a business that accrues a reasonable business tax every quarter? If so, you’ll probably find yourself making regular deposits to various tax accounts. Generally, you’ll have to deposit your excise, corporate income, employment and S corporation taxes long before you actually file your tax returns. In fact depending on your chosen infrastructure and tax plan, you may be making tax deposits on a monthly or bi-monthly basis. With that said, you’ll want to remain cognizant of rules for your tax deposits.
The rules for your tax accounts will vary depending on the type of tax you are paying. For example, unless you work strictly with freelance workers, you are required to withhold a portion of your employees’ paychecks in a trust for their taxes. If your quarterly employment taxes exceed $2,500, you are required to make a timely deposit to the federal Treasury. Should the amount fall below $2,500, you may opt to send a check with your quarterly return. Alternatively, if your employment taxes are less than $1,000 annually, you may pay the sum annually.
For untimely deposits, you may suffer a monetary penalty. A 15 percent charge is accrued for a simple failure to pay taxes in a timely manner. For willful failure to deposit, the responsible parties will be face with a 100 percent penalty. Any undeposited funds are the responsibility of the employer whether you are an LLC, corporation or other entity.
Depositing Taxes Electronically
A new policy implemented in January 2004 dictates that any business with an EIN is automatically enrolled in the EFTPS. Taxpayers who have Social Security and Medicare that exceed a certain amount use the EFTPS, or Electronic Federal Tax Payment System, to electronically deposit taxes. After 2004, some businesses were required to use this system to manage their business tax deposits.
Upon enrollment, you should receive a package in the mail with detailed instructions regarding the use of EFTPS. You must use deposit coupons with your transaction if you desire. If your business is not required to make deposits through the EFTPS, you may make your deposits at an approved financial institution.
The Deposit Coupon
To get a deposit coupon, visit the IRS website and use Form 8109, which is title Federal Tax Deposit Coupon. You’ll need to use one for every tax deposit your make. The form must include the amount of the transaction, the type of tax you’re paying, the time frame of the deposit and your current phone number. For each separate tax type and period, you must include a unique tax coupon for that specific transaction.
Using Coupons for Deposits
If you prefer to handle your deposits offline, you may mail or deliver them to an approved financial institution. To be sure your deposits are considered timely, mail the documents at least two days before the due date. If you can establish you mailed the forms on or before this date, the payments should be considered timely regardless of their arrival date. Again, if your deposit is not timely, you may be charged with a monetary penalty, unless you can otherwise prove reasonable cause for late submission. To make sure your money order and/or check is credited to your business tax account, include the following:
- Your Employer Identification Number
- The payment’s tax period
- The type of tax you are depositing for
While depositing your business taxes may not be your favorite enterprise endeavor, tax deposits are an essential part of a healthy business. You’ll certainly want to keep up with your regular tax deposits throughout the year to be prepared for tax season and avoid costly monetary penalties. Remember to have a stack of deposit coupons ready to go so your transactions are accredited to the proper business accounts.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.