Question

What happens when a monthly depositor accumulates $100,000 in tax liability on any day during a month?

A. Is a one day depositor the rest of the year
B. Remains a monthly depositor, but need to deposit on the next business day anytime accumulates $100,000 in tax liability
C. Becomes semiweekly for the rest of the year
D. Becomes semiweekly for the rest of current year and entire next calendar year, also needs to deposit on next business day

Answer 1

When a monthly depositor accumulates $100,000 in tax liability on any day during the month, they become a semiweekly depositor for the rest of the year and must deposit on the next business day.The correct option is D.

Step-by-step explanation:

When a monthly depositor accumulates $100,000 in tax liability on any day during a month, the correct response is that this depositor becomes semiweekly for the duration of the rest of the year. Additionally, they must deposit on the next business day. This circumstance typically pertains to businesses that withhold taxes from their employees' paychecks and likely means the depositor has reached a threshold amount where they must follow a more frequent deposit schedule due to the volume of their tax liabilities.

This shift in deposit frequency ensures that large amounts of collected taxes are transferred to the government in a timely fashion, improving cash flow and reducing risk related to holding onto large sums of tax liabilities. Once this threshold is reached, the depositor must adhere to the semiweekly schedule for the remainder of the year but not necessarily the next calendar year unless specified by tax regulations or if the situation repeats in following years.