Semi-Weekly 941 Deposit Schedule Causing Failure to Pay Notices - Help!

The semi-weekly deposit system is often misunderstood. It's not actually about making deposits every week - it's about which days of the week you must deposit based on your payday. If your payday (when you pay wages) falls on Wednesday, Thursday, or Friday, your deposit is due by the following Wednesday. If your payday falls on Saturday, Sunday, Monday, or Tuesday, your deposit is due by the following Friday. Since you mentioned you pay employees on Monday and make deposits on Friday, that timing is correct. However, the issue might be with the payment timing relative to the pay period end date rather than the actual payday. The IRS looks at when the tax liability was incurred, not just when you paid wages. Check your deposit dates against the actual semi-weekly deposit schedule rules using the IRS Tax Calendar or publication 15. Also, make sure you're selecting the correct payment date when scheduling the payments through EFTPS - this is a common source of confusion.

I had almost the exact same issue last year after we grew and got bumped to semi-weekly deposits. Spent hours on the phone getting nowhere until I found https://taxr.ai and uploaded my notices and payment records. They analyzed everything and found that I was correctly making the deposits on time, but the issue was with how the IRS was applying them to specific pay periods. The system flagged the deposits as late because I wasn't correctly indicating which pay period each deposit was for. I was just making the deposits without properly designating the tax periods they applied to. Once I understood the issue, I called the IRS with the specific information from the analysis and got all the penalties abated. Might be worth checking out if you're still confused about what's happening - they can tell you exactly which deposits were applied to which periods and why the IRS is considering them late.

Just wanted to follow up - I tried that taxr.ai service after seeing your comment and it was actually super helpful! I uploaded my own 941 deposit notices and payment records, and within minutes it showed me that I was making my deposits correctly timing-wise, but I was using the wrong tax type code in the EFTPS system. Instead of selecting "941 Tax Deposit" I was sometimes selecting "941 Quarterly Return" which was causing the system to misapply my payments. No wonder I kept getting those penalty notices! Never would have figured that out on my own since the IRS notices are so vague. They even provided a template letter for requesting penalty abatement based on reasonable cause. Just submitted it yesterday so fingers crossed!

After spending WEEKS trying to get through to the IRS about a similar deposit issue, I finally used https://claimyr.com to get through to an agent. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Basically they wait on hold with the IRS for you and call you when an agent is on the line. I was incredibly skeptical but desperate after trying for almost a month to get through. Within 2 hours I got a call back with an actual IRS agent ready to talk. The agent explained that with semi-weekly deposits, there's actually a lookup table based on your payday that determines when deposits are due. They reviewed my account and found that some deposits were applied to the wrong quarters because of how I entered them in EFTPS. They filed corrections on the spot and removed all penalties. Sometimes you just need to talk to a human at the IRS to sort these things out, but getting through is nearly impossible without help.

I need to eat my words and apologize. After my skeptical comment yesterday, I decided to try Claimyr as a last resort for a different tax issue I've been dealing with. I've been trying to reach the IRS for MONTHS about some tax deposits that were misapplied. It actually worked exactly as described. I got a call back in about 90 minutes with an IRS agent already on the line. The agent was able to pull up my account and immediately saw the problem - several of my semi-weekly deposits had been applied to the wrong tax periods because of how I was entering them in EFTPS. She made the corrections right there on the call and I just checked my account online - all the penalties have been reversed! I would have continued getting the runaround for who knows how long if I hadn't been able to speak directly with someone who could actually fix the issue.

One thing nobody mentioned yet - there's a special rule for semi-weekly depositors when you have $100,000 or more in tax liability on any day. In that case, you have to deposit by the next banking day, regardless of the normal Wednesday/Friday schedule. Is it possible you hit that threshold on any payday and didn't realize the different rule applied? That would explain why the IRS system might flag some of your deposits as late even though you thought you were following the schedule.

Has anyone else noticed that the IRS seems to be sending out WAY more incorrect notices lately? I swear half my clients are getting penalty notices for deposits that were clearly made on time. I'm wondering if there's some glitch in their system since they updated their computer systems.

This is incredibly frustrating and you're definitely not alone! I've been dealing with semi-weekly deposits for about 3 years now and the learning curve is steep. One thing that really helped me was creating a simple spreadsheet to track everything: pay date, deposit due date, actual deposit date, tax period it applies to, and the exact codes I'm using in EFTPS. This made it much easier to spot patterns when I was getting notices. Also, if you haven't already, request a transcript of your account from the IRS (Form 4506-T). Sometimes what shows up on the penalty notices doesn't match what's actually in their system, and the transcript will show you exactly how they've applied each payment. The fact that your local IRS office waived the fees suggests they know there's confusion on their end too. Don't give up - once you figure out the exact issue it becomes much more manageable. Keep detailed records of everything for now so you can prove your case if needed.

One thing that might help is understanding that the IRS penalty calculation system is largely automated and doesn't always account for nuances in how payments are processed through EFTPS. I've seen cases where the system flags deposits as late even when they were technically submitted on time. A few specific things to double-check: 1. When you schedule your EFTPS payment, make sure the "effective date" (when the money actually leaves your account) falls on or before the deposit deadline - not just when you initiate the transaction. 2. Be very careful about the "Tax Period" dropdown in EFTPS. For semi-weekly deposits, you need to select the specific quarter AND make sure you're not accidentally selecting "Annual" or "Monthly" instead of the quarterly option. 3. Bank holidays can throw off the timing. If your due date falls on a banking holiday, the deposit is due the next business day, but the EFTPS system doesn't always make this clear. I'd also suggest calling the Practitioner Priority Service line at 866-860-4259 if you or your tax preparer has a PTIN. It's a separate line with much shorter wait times than the general taxpayer line. Even if you're not a practitioner yourself, many enrolled agents will make this call on behalf of clients for a small fee. The good news is that first-time penalty abatement is usually granted automatically if you have a clean compliance history, so don't stress too much about the immediate financial impact while you figure this out.