What this notice is about
The CP235 is issued when it appears that you are using the prior year’s deposit schedule when you are required to use a different deposit schedule. We generally send a notice in November to inform you of the change in deposit requirements. The law allows us to grant penalty relief when there is a change to deposit requirements.
What you need to do
- Review your deposit requirements.
- If your total tax in the lookback period was $50,000 or less, you are a monthly depositor. If your total tax in the lookback period was over $50,000, you are a semi-weekly depositor.
- The lookback period is:
- for annual returns, the second previous year;
- for Form 941 the four quarters ending with the second quarter of the previous year. If you used Form 944 in either of the two prior years, the lookback period is the second previous year.
- Monthly depositors must deposit by the 15th of the following month. If the 15th is a weekend or holiday, the deposit is due the next business day.
- Semiweekly depositors with payroll on Wednesday, Thursday, or Friday must deposit on the following Wednesday. Those with payroll on Saturday, Sunday, Monday, or Tuesday must deposit on the following Friday.
- To avoid future penalties, use the correct deposit schedule immediately.
You may want to
- Check your records for the lookback period to verify that the deposit schedule you used is correct.
- If there is a discrepancy, be sure all tax returns are filed.
Frequently asked questions
I did not receive a notice showing the change in deposit schedule.
You are required to determine the correct deposit schedule, even if you don’t receive a notice. We send a notice in November if your deposit requirement changed, based on the original returns from the lookback period. We don't consider amended returns. If a return is not filed when we send the notices, we won’t be able to determine the correct deposit schedule.
Do I have to deposit electronically?
You must pay all deposits electronically unless your tax liability is less than $2,500. If your tax is less than $2,500, you can pay with your tax return. Also, for Form 941, you can pay with your tax return if the tax for the prior quarter is less than $2,500, and you did not include a $100,000 liability in the current quarter.
What if my accumulated tax liability reaches $100,000?
You must deposit the next business day. Once your accumulated tax liability reaches $100,000 for any month, you immediately become a semi-weekly depositor for the rest of the current year and the next year.
- Publication 15 (Circular E), Employer’s Tax Guide (For Forms 941, 944, 945)
- Publication 51 (Circular A), Agricultural Employer’s Tax Guide (For Form 943)
- Form 941, Employer's Quarterly Federal Tax Return and Instructions
- Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees and Instructions
- Form 944, Employer’s ANNUAL Federal Tax Return and Instructions
- Form 945, Annual Return of Withheld Federal Income Tax and Instructions
Tips for next year
Check your deposit requirements for next year by this October so you will have time to adjust your payroll deposits if your deposit requirements change.