Monthly Deposits
1042 – Annual Return for Withholding Tax on U.S.-Source Income of Foreign Persons.
945 – Annual Return for Federal Income Tax Withheld.
720 – Quarterly Federal Excise Tax Return.
941 – Employer’s Quarterly Federal Tax Return.
This refers to monthly tax deposit requirements for withholding agents and employers in the U.S. who are responsible for:
Withholding and remitting taxes on payments to foreign persons (Form 1042).
Withholding federal income tax on certain nonpayroll payments (Form 945).
Reporting and paying excise taxes (Form 720).
Submitting employer payroll taxes (Form 941).
Key Compliance Points:
Form 1042 applies to foreign income withholding and is filed annually.
Form 945 covers federal income tax withholding on nonpayroll payments.
Form 720 reports excise taxes (e.g., fuel, tobacco, air transportation).
Form 941 reports employment taxes (Social Security, Medicare, and withheld income tax) on a quarterly basis.
Penalties for Deposits
Civil Penalty: Up to 100% of the Amount Owed (IRC § 6656).
Criminal Penalty: Up to 5 years of imprisonment (IRC § 7201).
Interest: 7% annually for the first quarter.
These are penalties for late or incorrect federal tax deposits related to withholding, payroll, or excise taxes.
IRC § 6656: Imposes a civil penalty for failing to timely deposit employment or withholding taxes. The penalty ranges from 2% to 15%, but in cases of fraud or willful failure, it can reach 100% of the unpaid amount (known as the Trust Fund Recovery Penalty).
IRC § 7201: Covers criminal tax evasion, leading to up to 5 years of imprisonment and/or substantial fines.
Interest Rate: The IRS adjusts the interest rate quarterly. The 7% rate applies to Q1, but it may change throughout the year.