Deposit Rules for Small Businesses Simplified.
On January 1, the IRS ended its monthly employment tax deposit requirements
for many small businesses, allowing them, instead, to make such payments
quarterly. Businesses now can make employment tax payments every three
months if the amount is under $2,500. Previously, the IRS permitted
quarterly payments only, for businesses whose payments were less than
$1,000. The threshold, which had been $500, was raised to $1,000 in
1998. After further study, the IRS increased the threshold to the
current $2,500. Small businesses that are above the new threshold
level still have to make monthly payments. The change in deposit requirements
affects approximately one million small businesses, which make tax
payments of $6.6 billion, or about 13% of the $52.7 billion total.
Not only will the change mean less paperwork for small businesses
and the IRS, but it also will create a number of other advantages:
a) IRS notices to small businesses are expected to decrease about
70% because there will be fewer deposits.
b) Because deposits will be less frequent, small businesses will make
fewer mistakes and will incur fewer penalties.
c) Making payments quarterly instead of monthly will help ease small
businesses' cash flow.
Small businesses with employment tax deposits of less than $2,500
per quarter may pay them when they file form 941, Employer's Quarterly
Federal Tax Return.
ja2/2001, pg 75
