Eliminating Federal Tax Deposits on Payroll : What Does This Mean for Employers?

Effective January 1, 2011, the Financial Management Service discontinues the process of paper Federal Tax Deposit Coupons, along with a check deposited at your bank. 

Now you ask, what does this mean to Employers? 

First, all employers will be required to submit the federal tax deposit via the Electronic Federal Tax Payment System (EFTPS). 

These taxes related to payroll include:

  • Social Security
  • Medicare and Federal taxes
  • FUTA taxes

There will not be any change to the companies depositing status rules.  Your company will remain a monthly, semiweekly or on-day depositor and would only change based on total liability in a pay period.


Banking Days, Business Days & Legal Holidays


One change that may take employers some adjusting is the definition of banking days to business days.  This means every day of the week is considered a business day except, Saturday, Sunday or legal holidays.  New regulations indicate a legal holiday as those that coincide with the District of Columbia and will now exclude state holidays as a legal holiday.  For example:  The state observes Good Friday as a holiday, but the District of Columbia does not.  Therefore you need to change the way of looking at tax deposit due dates to include Good Friday as a business day and not a holiday.

You may be wondering what type of penalties will be incurred if you fail to make the payroll tax deposit in a timely manner. Good news - the IRS will not assert penalties during the calendar year 2011 to allow employers time to adjust to the District of Columbia’s observed holidays. 
These holidays are:

  • New Year’s Day
  • Martin Luther King, Jr.’s Birthday
  • Washington’s Birthday
  • District of Columbia Emancipation Day
  • Memorial Day
  • Independence Day
  • Labor Day
  • Columbus Day
  • Veterans Day
  • Thanksgiving Day
  • Christmas Day
  • Presidential Inauguration

To assist with these changes the IRS Publication 509 Tax Calendars have been updated for 2011.  This publication will provide the due dates for deposits and returns.  These changes will eventually result in a change to Form 941 to remove Line 16, reporting the state where the deposits originate.

Sherry Dwyer, CPP
Software Support Manager

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