IRS Publication 15 — Employer's Tax Guide (Circular E)

Depositing on time. EFTPS accepts same day payments of $1 million or less if the payment is submitted before 3:00 p.m. Eastern time on a business day. If your payment is more than $1 million, you must submit the deposit by 8:00 p.m. Eastern time the day before the date the deposit is due. If you use a third party to make a deposit on your behalf, they may have different cutoff times. Same-day wire payment option. If you fail to submit a timely deposit transaction on EFTPS, you can still make your deposit on time by using the Federal Tax Collection Service (FTCS) to make a same-day wire payment. T o use the same-day wire payment method, you’ll need to make arrangements with your financial institution ahead of time. Check with your financial institution regarding availability, deadlines, and costs. Your financial institution may charge you a fee for payments made this way. T o learn more about the information you’ll need to give to your financial institution to make a same -day wire payment, go to IRS.gov/SameDayWire.

How to claim credit for overpayments. If you deposited more than the right amount of taxes for a quarter, you can choose on Form 941 for that quarter (or on Form 943, Form 944, or Form 945 for that year) to have the overpayment refunded or applied as a credit to your next return. Don’t ask EFTPS to request a refund from the IRS for you. Deposit Penalties Although the deposit penalties information provided next refers specifically to Form 941, these rules also apply to Form 943, Form 944, and Form 945. The penalties won’t apply if the employer qualifies for the exceptions to the deposit requirements discussed under Payment with return , earlier, in this section.

Penalties may apply if you don’t make required deposits on time or if you make deposits for less than the required amount. The penalties don’t apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. If you receive a penalty notice, you can provide an explanation of why you believe reasonable cause exists. If you timely filed your employment tax return, the IRS may also waive deposit penalties if you inadvertently failed to deposit and it was the first quarter that you were required to deposit any employment tax, or if you inadvertently failed to deposit the first time after your deposit frequency changed. You must also meet the net worth and size limitations applicable to awards of administrative and litigation costs under section 7430; for individuals, this means that your net worth can’t exceed $2 million, and for businesses, your net worth can’t exceed $7 million and you also can’t have more than 500 employees. The IRS may also waive the deposit penalty the first time you’re required to make a deposit if you inadvertently send the payment to the IRS rather than deposit it by EFT . For amounts not properly or timely deposited, the penalty rates are as follows. Penalty Charged for... 2% Deposits made 1 to 5 days late. 5% Deposits made 6 to 15 days late. 10% Deposits made 16 or more days late, but before 10 days from the date of the first notice the IRS sent asking for the tax due. 10% Amounts that should have been deposited, but instead were paid directly to the IRS, or paid with your tax return. But see Payment with return, earlier in this section, for exceptions. 15% Amounts still unpaid more than 10 days after the date of the first notice the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier.

Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. Special rule for former Form 944 filers. If you filed Form 944 for the prior year and file Forms 941 for the current year, the FTD penalty won’t apply to a late deposit of employment taxes for January of the current year if the taxes are deposited in full by March 15 of the current year. Order in which deposits are applied. Deposits are generally applied to the most recent tax liability within the quarter. If you receive an FTD penalty notice, you may designate how your deposits are to be applied in order to minimize the amount of the penalty if you do so within 90 days of the date of the notice. Follow the instructions on the penalty notice you receive. For more information on designating deposits, see Revenue Procedure 2001 -58. You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001 -50 at IRS.gov/pub/irs-irbs/ irb01-50.pdf.

Example. Cedar, Inc., is required to make a deposit of $1,000 on April 15 and $1,500 on May 15. It doesn’t make the deposit on April 15. On May 15, Cedar, Inc., deposits $2,000. Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the May 15 deposit and the remaining $500 is applied to the April deposit. Accordingly, $500 of the April 15 liability remains undeposited. The penalty on this underdeposit will apply as explained earlier. Trust fund recovery penalty. If federal income, social security, or Medicare tax that must be withheld (that is, trust fund taxes) aren’t withheld or aren’t deposited or paid to the U.S. Treasury, the trust fund recovery penalty may apply. The penalty is 100% of the unpaid trust fund tax. If these unpaid taxes can’t be immediately collected from the employer or business, the trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, or paying over these taxes, and who acted willfully in not doing so. The trust fund recovery penalty won’t apply to any amount of trust fund taxes an employer holds back in anticipation of any credits they are entitled to. A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship, or any other person or 36 Publication 15 (2026)