TaxBandits Knowledge Base

What is a $100,000 next-day deposit obligation?

A $100,000 next-day deposit obligation in Form 941 refers to a special rule requiring certain employers to make next-day deposits for any employment taxes that accumulate to $100,000 or more on any day during a deposit period.

For example, if you’re a monthly schedule depositor and accumulate taxes of $100,000 or more at least once in the deposit period, you automatically become a semiweekly depositor for the remainder of the calendar year and the following calendar year. Generally, it is not recommended to accumulate tax liability after the deposit period ends.

Check out the examples below for further clarification:

Example 1:

Star LLC is a monthly schedule depositor and must deposit taxes by the 15th of the following month. In February, they accumulated $25,000 in taxes and paid it by March 15. On March 1, they accumulated $123,000 in taxes. Since they exceeded the $100,000 threshold, they are required to deposit the tax by the next day, March 2, according to the $100,000 next-day deposit rule. Additionally, they become a semiweekly schedule depositor for the rest of the calendar year.

Example 2:

Mat LLC is a semiweekly schedule depositor and has accumulated $125,000 in tax liability on a Monday. Under the $100,000 next-day deposit rule, they must deposit this tax by the next day, Tuesday. On Tuesday, they accumulate an additional $15,000 in taxes. As per the semiweekly schedule, they can deposit this amount by Friday since it does not exceed $100,000.