What does the "Lookback period" help employers to calculate?

The "Lookback period" is a specific timeframe that employers use to determine their payroll tax deposit schedule. This period analyzes the employer's tax liability over a set duration, typically looking back at either the previous calendar year or the last quarter, depending on the specific situation.

By calculating the total payroll tax liability during the Lookback period, employers can determine whether they qualify as a monthly or semi-weekly depositor for federal payroll taxes. This classification is essential for ensuring compliance with IRS requirements, as it dictates how often the employer is required to deposit their payroll taxes. Thus, the correct answer correctly identifies that the Lookback period helps employers calculate their correct deposit frequency based on previous tax liabilities.