IRS Notice 931: Deposit Schedules, Penalties, and Abatement

IRS Notice 931 is an informational publication, not a bill or a penalty. It explains the federal tax deposit requirements for employment taxes: which deposit schedule applies to your business, when withheld income tax and FICA are due, and what happens if you miss a deadline. If you received it, the IRS is telling you how to deposit the money you withhold from employee paychecks correctly. The rules matter because depositing late, in the wrong amount, or through the wrong channel triggers penalties that scale up fast.

What the Notice Is Telling You

The IRS describes Notice 931 as a notice that “informs taxpayers of their federal tax deposit requirements for quarterly Form 941 and annual Forms 943, 944, 945 and CT-1.”1Internal Revenue Service. About Notice 931, Deposit Requirements for Employment Taxes Treat it as a reference sheet. It sets out the two deposit schedules, the lookback rule that assigns you to one of them, and the special thresholds that can change your obligations mid-year.

The rules apply to any employer that withholds federal income tax and FICA from wages, whether you file quarterly on Form 941 or annually on Forms 943, 944, 945, or CT-1.2Internal Revenue Service. Notice 931 – Deposit Requirements for Employment Taxes The withheld amounts are trust fund taxes: the IRS considers them “part of their wages you pay to the Treasury instead of to your employees” and “held in trust until they are paid to the Treasury.”3Internal Revenue Service. Trust Fund Taxes That designation is why the penalties are so aggressive, and why unpaid deposits can eventually reach owners and officers personally.

Which Deposit Schedule Applies to You

Every Form 941 employer is assigned one of two deposit schedules based on a lookback period. For a given calendar year, that period runs from July 1 of two years earlier through June 30 of the prior year. For 2026, it’s July 1, 2024 through June 30, 2025.2Internal Revenue Service. Notice 931 – Deposit Requirements for Employment Taxes Add up the total tax liability you reported on all four Forms 941 filed in that window. The total tells you which schedule you’re on for the entire year.

Monthly Depositor

If your lookback total was $50,000 or less, you’re a monthly depositor. Deposit the taxes you accumulated during a month by the 15th of the following month.2Internal Revenue Service. Notice 931 – Deposit Requirements for Employment Taxes Taxes withheld in January are due February 15.

Semiweekly Depositor

If the total exceeded $50,000, you’re semiweekly. The deadline depends on the payday:4Internal Revenue Service. Topic No. 757, Forms 941 and 944 – Deposit Requirements

  • Payday on Wednesday, Thursday, or Friday: deposit by the following Wednesday.
  • Payday on Saturday, Sunday, Monday, or Tuesday: deposit by the following Friday.

You always get at least three business days between payday and the deposit deadline. A federal holiday inside that window pushes the deadline to the next business day.

The $100,000 Next-Day Rule

No matter which schedule you’re on, if your accumulated employment tax liability hits $100,000 or more on any single day, you must deposit the full amount by the close of the next business day. Triggering the rule also converts you to a semiweekly depositor for the rest of the current year and all of the following year.4Internal Revenue Service. Topic No. 757, Forms 941 and 944 – Deposit Requirements A monthly depositor with a large one-off payday can hit this threshold without expecting to.

The $2,500 Exception for Very Small Liabilities

If your total employment tax liability for the quarter is under $2,500, you can skip separate deposits and pay the full amount when you file your Form 941.5eCFR. 26 CFR 31.6302-1 – Deposit Rules for Taxes Under the Federal Insurance Contributions Act (FICA) and Withheld Income Taxes The same option applies if the prior quarter came in under $2,500, provided you didn’t trigger the $100,000 next-day rule. Once your liability climbs above the threshold, the regular schedule applies again.

How Deposits Have to Be Made

All federal tax deposits must be made electronically. The Electronic Federal Tax Payment System (EFTPS) is the standard method, though you can also use a same-day wire through your bank or pay through an authorized payroll provider.6Internal Revenue Service. Depositing and Reporting Employment Taxes Mailing a check to the IRS in place of a deposit is not permitted and carries a 10% penalty on the amount, even if the payment is on time.7Internal Revenue Service. Internal Revenue Manual 20.1.4 – Failure to Deposit Penalty

If you’re not enrolled in EFTPS yet, start now. After enrollment, the IRS mails a PIN to your address of record, which takes five to seven business days.8Electronic Federal Tax Payment System. Electronic Federal Tax Payment System Home Employers who enroll only after a deposit is due, and miss the deadline because their PIN hadn’t arrived, get very little sympathy from the IRS.

What Happens If You Deposit Late

The Failure to Deposit penalty under 26 U.S.C. ยง 6656 applies to the underpayment: the difference between what you owed and what you deposited on time. It escalates in tiers based on how late the deposit is:9Office of the Law Revision Counsel. 26 USC 6656 – Failure to Make Deposit of Taxes

  • 1 to 5 days late: 2% of the underpayment.
  • 6 to 15 days late: 5%.
  • More than 15 days late: 10%.
  • Still unpaid 10 days after the IRS sends its first delinquency notice: 15%.

The last tier is worth reading carefully. The jump from 10% to 15% doesn’t happen because more time passes; it happens because the IRS notifies you and you still don’t pay. A deposit 20 days late and one 90 days late both sit at 10% until the delinquency clock starts.

Interest accrues on top of the penalty. For the first quarter of 2026, the underpayment rate is 7% per year, compounded daily.10Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 It dropped to 6% on April 1, 2026, and continues to accrue until the tax, penalty, and interest are all paid.11Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges

The Safe Harbor for Small Shortfalls

The IRS won’t penalize every underpayment. Under the deposit safe harbor, no penalty applies if the shortfall is no more than the greater of $100 or 2% of the required deposit.5eCFR. 26 CFR 31.6302-1 – Deposit Rules for Taxes Under the Federal Insurance Contributions Act (FICA) and Withheld Income Taxes If you owed $10,000 and deposited $9,800, the $200 gap is inside the safe harbor. You still have to make up the shortfall on time, though. Semiweekly depositors must deposit the missing amount by the first Wednesday or Friday on or after the 15th of the month following the month the original deposit was due. Monthly depositors have until the return due date. Miss that makeup deadline and the safe harbor no longer protects the shortfall.

Getting a Penalty Removed

If a Failure to Deposit penalty has already been assessed, two paths to relief are usually worth trying before paying it.

First-Time Abatement

The IRS offers an administrative waiver known as First-Time Abatement (FTA) for employers with a clean recent history. You qualify if you’ve filed the same return type for the prior three years, received no penalties in that window (or had any prior penalties removed for a reason other than FTA), and have not received more than three prior FTD waivers in the same period.12Internal Revenue Service. Administrative Penalty Relief FTA does not cover the 10% penalty for failing to deposit electronically; for that one, you’d need reasonable cause.

Requesting FTA is straightforward. Call the number on the IRS notice; you don’t need to name the program or send documents, because the IRS will pull your account and check.12Internal Revenue Service. Administrative Penalty Relief A written request or Form 843 also works.

Reasonable Cause

Section 6656 itself waives the penalty when the failure “is due to reasonable cause and not due to willful neglect.”9Office of the Law Revision Counsel. 26 USC 6656 – Failure to Make Deposit of Taxes Reasonable cause means you exercised ordinary business care but couldn’t comply. Natural disasters, serious illness of the person responsible for deposits, destruction of business records, and documented bank processing errors are the kinds of circumstances that qualify. Being busy or unfamiliar with the rules is not. Whatever you’re claiming, back it with documentation: insurance claims, FEMA declarations, written confirmations from your bank. Vague assertions rarely succeed.

Timing

Abatement must be requested within the refund statute of limitations: three years from the return’s due date, or two years after the penalty was paid, whichever is later. Paying the penalty first doesn’t waive your right to request abatement afterward, but the clock still runs.

Why Unpaid Payroll Taxes Become Personal

One boundary the notice itself doesn’t spell out is worth knowing. When employment taxes go completely unpaid, the IRS can assess the Trust Fund Recovery Penalty (TFRP) against individuals connected to the business. The penalty equals the full amount of unpaid trust fund taxes: withheld income tax plus the employee share of Social Security and Medicare.13Internal Revenue Service. Employment Taxes and the Trust Fund Recovery Penalty (TFRP) It’s dollar-for-dollar, not a percentage.

Two elements have to line up. The person must be “responsible,” meaning they had authority to decide which bills got paid; officers, directors, owners, and anyone with check-signing authority are the usual targets. And the failure must be “willful,” which doesn’t require bad intent. Being aware of the unpaid taxes and paying other creditors anyway is enough.13Internal Revenue Service. Employment Taxes and the Trust Fund Recovery Penalty (TFRP) The TFRP can be assessed against multiple people at once, and it can reach outside parties like accountants or lenders who had operating-account authority.14Internal Revenue Service. Internal Revenue Manual 5.7.3 – Establishing Responsibility and Willfulness for the Trust Fund Recovery Penalty (TFRP)

What to Do Now That You Have the Notice

Because Notice 931 is informational, the right response is a short compliance review rather than a scramble:

  • Run the lookback calculation and confirm the deposit schedule you’re using matches what the IRS expects. A mismatch here is the most common source of inadvertent late deposits.
  • Verify your EFTPS enrollment. If you’re not enrolled, start today; the PIN mailing takes five to seven business days.
  • Reconcile the liability on your most recent Form 941 against what you actually deposited. If there’s a shortfall inside the safe harbor, make it up by the applicable makeup date.
  • Calendar your deadlines, especially if you’re semiweekly, because the due date shifts with the payday.
  • Watch the $100,000 threshold. A single large payday can trigger the next-day rule and reclassify you as semiweekly for the rest of this year and all of next year.

If a Failure to Deposit penalty has already been assessed on a separate notice, pay down the underlying tax quickly to stop the tier from climbing, then decide whether to pursue First-Time Abatement or reasonable cause on the penalty itself.