Under IRS rules, when does a contractor's payroll tax liability require deposits by electronic funds transfer (EFTPS) rather than by check?
Explanation
26 CFR §31.6302-1(h) requires electronic deposit once a business made more than $200,000 in aggregate federal tax deposits in a prior determination year, and once the rule applies it keeps applying even if later deposits fall below the figure. Headcount is not the test, and a ten-employee shop may be far under the threshold. The entity type is irrelevant: the rule follows dollars deposited, not whether the payer is a corporation, an LLC or a proprietor. And being paid by the federal government affects how the contractor is paid, not how it deposits.
Law Reference: 26 CFR §31.6302-1(h)This topic, taught in full in the CSLB Law & Business guide. CSLB Law & Business — Complete Study Guide (2026) — PDF + EPUB, $24.99 · 14-day refund →
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