APA's Top Payroll Questions & Answers for 2020 - 66

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APA's Top Payroll Questions & Answers for 2019

Depositing and Reporting Withheld Taxes

$100,000 Next-Day Deposit Rule explained

Q.

My employer has been a semiweekly depositor for years and years
with deposit liability of over $300,000 per biweekly payroll. Last fall, we
received an IRS letter with a fine with no explanation, just a quarter/
year indicator. Our attorney contacted the IRS and was told that our
company began accumulating tax deposits in excess of $100,00 in
the first quarter of the previous year and has been doing so ever
since. The attorney was referred to IRS Notice 931, which says that if
you accumulate a tax liability of $100,000 or more on any day during
a deposit period, you must deposit the tax by the close of the next
business day. We have had $300,000+ liabilities for many years and
have not had this issue before. Is this new? Does the IRS answer make
sense?

A.

The IRS reference to Notice 931 outlines the $100,000 Next-Day
Deposit Rule, which is also included in Publication 15. This rule has
been in place for many years. Under the Next-Day Deposit rule, if an
employer's accumulated employment tax liability reaches $100,000
on any day during a monthly or semiweekly deposit period, the taxes
must be deposited by the close of the next business day. In determining
whether the $100,000 threshold is met, monthly depositors consider
only those taxes accumulated during the current calendar month,
not any previous months. Semiweekly depositors take into account
only those taxes accumulated during the current Wednesday-Friday
or Saturday-Tuesday semiweekly period. Employers do not total their
payroll and nonpayroll withheld tax liabilities to determine if the oneday deposit rule is triggered. Your company had been depositing on a
semiweekly basis, but if it had been a monthly depositor the Next-Day
Deposit Rule would have made your company a semiweekly depositor
for the remainder of the current calendar year and the entire next
calendar year.
For more information about the Next-Day Deposit Rule with
examples of the ways in which it is applied, see The Payroll Source®,
§8.2-1.

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https://www.irs.gov/pub/irs-pdf/n931.pdf https://www.irs.gov/pub/irs-pdf/n931.pdf https://www.irs.gov/pub/irs-pdf/p15.pdf https://bookshelf.americanpayroll.org/payroll_source/ https://bookshelf.americanpayroll.org/payroll_source/

APA's Top Payroll Questions & Answers for 2020

Table of Contents for the Digital Edition of APA's Top Payroll Questions & Answers for 2020

Table of Contents
APA's Top Payroll Questions & Answers for 2020 - Intro
APA's Top Payroll Questions & Answers for 2020 - Cover1
APA's Top Payroll Questions & Answers for 2020 - a
APA's Top Payroll Questions & Answers for 2020 - b
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APA's Top Payroll Questions & Answers for 2020 - Table of Contents
APA's Top Payroll Questions & Answers for 2020 - e
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