IRS Notice 931 – IRS Forms, Instructions, Pubs 2026 – In the complex world of payroll management, staying compliant with IRS regulations is essential for businesses of all sizes. IRS Notice 931, titled “Deposit Requirements for Employment Taxes,” provides critical guidance on how employers must handle deposits for withheld federal income taxes, Social Security, and Medicare taxes—collectively known as employment taxes. This notice, last revised in September 2025, outlines the rules for determining deposit schedules, due dates, and penalties to avoid costly mistakes. Whether you’re a small business owner, HR professional, or accountant, understanding these requirements can help ensure timely compliance and minimize IRS penalties. In this article, we’ll break down the key elements of IRS Notice 931, including updates relevant to 2026, to help you navigate employment tax deposits effectively.
What Are Employment Taxes and Why Do They Matter?
Employment taxes include federal income tax withheld from employees’ wages, as well as the employee’s and employer’s shares of Social Security (6.2% each) and Medicare (1.45% each) taxes. For 2026, the Social Security wage base is $184,500, meaning wages above this amount are not subject to Social Security tax but remain liable for Medicare. These taxes fund essential programs like retirement benefits and healthcare.
IRS Notice 931 specifically addresses deposit requirements for taxes reported on Form 941 (Employer’s Quarterly Federal Tax Return) and annual forms like 943, 944, 945, and CT-1. It does not cover Federal Unemployment Tax Act (FUTA) deposits, which follow separate rules in Form 940 instructions. Proper depositing is crucial because failure to comply can result in penalties ranging from 2% to 15% of the underpaid amount, depending on how late the deposit is.
Who Must Deposit Employment Taxes?
Most employers who withhold employment taxes are required to deposit them with the IRS. This includes businesses filing quarterly returns (Form 941) and those filing annually (Forms 943 for agricultural employers, 944 for small employers, 945 for nonpayroll items, and CT-1 for railroad employers). New employers are automatically treated as monthly depositors in their first year (or first two years for annual filers), with prior tax liabilities considered zero.
Exceptions apply if your total liability for a quarter is under $2,500 and you haven’t triggered the $100,000 next-day rule (more on this below). In such cases, you may pay the taxes with your return instead of depositing separately.
How to Determine Your Deposit Schedule: Monthly vs. Semiweekly
Your deposit schedule—monthly or semiweekly—is based on your total employment tax liability during a “lookback period,” not on your payroll frequency. This period is reviewed annually before the start of each calendar year.
Lookback Period Explained
The lookback period varies by form:
| Form Type | Lookback Period | Example for 2026 |
|---|---|---|
| Form 941 (Quarterly) | July 1 of two years prior to June 30 of the prior year (4 quarters) | July 1, 2024 – June 30, 2025 |
| Forms 943, 944, 945, CT-1 (Annual) | Second preceding calendar year | Calendar year 2024 |
If your total liability during the lookback period is $50,000 or less, you’re a monthly depositor. If it exceeds $50,000, you’re a semiweekly depositor. Adjustments made via amended returns (e.g., Form 941-X) do not retroactively change your lookback liability—it’s based on originally reported amounts.
For 2026, employers should review their 2024-2025 liabilities now to confirm their schedule, as changes must be implemented starting January 1.
Key Deposit Rules and Due Dates
Deposits must be made electronically via the Electronic Federal Tax Payment System (EFTPS), IRS Direct Pay, or an IRS business tax account. Paper checks are no longer accepted, and third-party services may charge fees.
- Monthly Schedule: Deposit all taxes accumulated in a month by the 15th of the following month. If no wages are paid in a month, no deposit is required.
- Semiweekly Schedule:
- Paydays on Wednesday, Thursday, or Friday: Deposit by the following Wednesday.
- Paydays on Saturday, Sunday, Monday, or Tuesday: Deposit by the following Friday.
Due dates falling on non-business days (weekends or federal holidays) shift to the next business day. Semiweekly depositors always have at least three business days to deposit after a period ends.
For annual filers, rules align with calendar-year periods but follow the same monthly or semiweekly logic.
The $100,000 Next-Day Deposit Rule
If your undeposited employment tax liability reaches $100,000 or more on any single day (before applying credits), you must deposit it by the close of the next business day. This overrides your regular schedule.
- Monthly depositors triggering this become semiweekly for the remainder of the year and the next full year.
- Liabilities don’t carry over across deposit periods—reset at the start of each new period.
Example: If a semiweekly depositor accumulates $95,000 by Tuesday and adds $10,000 on Wednesday, deposit the $95,000 by Friday and the $10,000 by the following Wednesday.
Penalties for Non-Compliance and Safe Harbor Relief
Failure to deposit on time incurs tiered penalties: 2% for deposits 1-5 days late, up to 15% for more than 10 days late or non-payment. However, the “Accuracy of Deposits” safe harbor waives penalties for underdeposits if the shortfall is no more than the greater of $100 or 2% of the required amount, and it’s made up by a specified date.
- Monthly depositors: Makeup by the return due date.
- Semiweekly depositors: Earlier of the first Wednesday/Friday after the 15th of the next month or the return due date.
To avoid penalties when liability is under $2,500, it’s safer to deposit per your schedule rather than paying with the return.
How to Make Deposits: EFTPS and Other Options?
All deposits must use electronic funds transfer (EFT). EFTPS allows same-day wires for urgent needs, with limits (e.g., $1 million by 3 p.m. ET). Starting in 2026, the IRS mandates electronic payments for balances due on returns and issues refunds via direct deposit for efficiency.
Recent Updates and Changes for 2026
While the core rules in IRS Notice 931 remain consistent from the 2025 revision, broader tax changes may indirectly impact employment taxes. The One Big Beautiful Bill Act (OBBBA), signed in 2025, introduces deductions for qualified tips (up to $25,000) and overtime (up to $12,500 for singles), effective retroactively for 2025. However, these are claimed on personal tax returns and do not alter employer withholding or deposit requirements for 2025. Updated Forms W-2 and W-4 for 2026 will reflect these, potentially affecting future withholding adjustments.
Additionally, OBBBA enhances employer credits for childcare (up to $600,000 for small businesses) and introduces Trump accounts for child savings, with employer contributions up to $2,500 excludable from income starting July 4, 2026. These don’t change deposit rules but may increase overall tax planning complexity.
Always check IRS.gov for the latest guidance, as tax laws evolve. For 2026, inflation adjustments include a standard deduction of $16,100 for singles and a top tax bracket threshold of $640,600.
Final Tips for Compliance
To stay ahead:
- Review your lookback period annually.
- Use EFTPS for all deposits.
- Monitor for the $100,000 threshold.
- Consult a tax professional for personalized advice.
By following IRS Notice 931, you can avoid penalties and streamline your payroll process. Download the full notice from IRS.gov for detailed examples and forms. If you’re unsure about your schedule, the IRS may send Notice CP136 to notify you of changes.