Do you know how often you need to deposit federal income, Social Security, and Medicare taxes? You can’t deposit the taxes whenever you feel like. Your deposit frequency is based on a lookback period. So, what is a lookback period?
What is a lookback period?
A lookback period is the time frame employers use to figure out their deposit schedule for withheld FICA tax (Social Security and Medicare) and federal income tax. Your tax liability during the lookback period determines whether you deposit these employment taxes monthly or semiweekly. Your IRS lookback period depends on if you file Form 941 or Form 944.
Lookback Period: Use the lookback period to determine your deposit schedule for FICA and federal income taxes.
About Forms 941 and 944
Before we dive into deposit schedules and lookback periods, let’s take a second to revisit Forms 941 and 944.
As an employer, you either report employee wages and payroll taxes on Form 941 or 944. You can only use Form 944 if the IRS tells you to.
Form 941, Employer’s Quarterly Federal Tax Return, is a form that employers use to report employee wages and taxes quarterly. Most employers use this form.
Form 944, Employer’s Annual Federal Tax Return, is a form that employers use to report employee wages and taxes annually. Only very small businesses use this form.
IRS payroll deposit schedule
Regardless of whether you file Form 941 or 944, you will either be a monthly or semiweekly depositor. Again, your total tax liability during the lookback period determines which schedule you must follow.
Take a look at the difference in tax liability between monthly and semiweekly depositors:
Monthly depositor: Employers who reported a tax liability of $50,000 or less during the lookback period
Semiweekly Depositor: Employers who reported a tax liability of more than $50,000 during the lookback period
Monthly depositors must deposit their employment taxes collected and contributed during a month by the 15th day of the following month. For example, you must deposit taxes collected in June by July 15.
Semiweekly depositors’ due dates are determined by payday. If payday falls on a Wednesday, Thursday, and/or Friday, deposit taxes by the following Wednesday. If payday falls on a Saturday, Sunday, Monday, and/or Tuesday, deposit taxes by the following Friday.
You cannot pay your liabilities based on a previous deposit schedule or how often you pay your employees. Use the lookback period to determine your deposit frequency.
Determine your deposit schedule before the beginning of each calendar year. Once you figure out your deposit schedule, use it for the whole year.
Lookback period for Forms 941 and 944
Form 941 filers use a four-quarter lookback period that starts halfway through one calendar year (July 1) and ends halfway through the next calendar year (June 30).
Form 944 filers use an annual lookback period that looks at the employer’s total tax liability during the calendar year (January – December).
But, which calendar years do you look at? Let’s get into the nitty-gritty of the IRS lookback period for Form 941 and Form 944 filers below.
What is the lookback period for Form 941 filers?
Again, Form 941 filers report their Social Security, Medicare, and federal income tax liabilities on a quarterly basis.
Form 941 filers have a four-quarter lookback period that spans from July 1 to June 30 the following year.
Let’s say you want to determine your deposit schedule for 2024. You would calculate your total tax liability from July 1, 2022 to June 30, 2023.
