Contractor License Practice Exam

How often must employers pay payroll taxes once they become monthly depositors?

1. Weekly

2. Bi-weekly

3. Monthly

4. Quarterly

The correct answer is: Monthly

Once employers have classified themselves as monthly depositors for payroll taxes, they are required to make their tax deposits on a monthly basis. This classification typically occurs when an employer has an annual payroll tax liability of $50,000 or less. As monthly depositors, employers must deposit the payroll taxes owed on the 15th day of the following month following the month in which the wages were paid. Choosing monthly as the frequency ensures that employers stay compliant with IRS regulations and manage their cash flow more effectively. Other frequencies like weekly or bi-weekly imply a more frequent payment schedule, which does not apply to monthly depositors, while quarterly deposits are reserved for employers who have a smaller annual tax liability and choose to file less frequently. Thus, consistent monthly deposits align with this designation and the IRS guidelines for managing payroll tax obligations.