Helpful Information on Payroll Taxes
When you’re a business owner, you must withhold taxes from your employee’s paychecks every pay period. These taxes are for federal (and possibly state) income tax and FICA contributions (Social Security and Medicare). The number of exemptions each employee claims is the basis for income tax withheld. A party of the employee’s gross earnings goes to FICA contributions. You must match the FICA amount partially or fully. A bank accredited as a depository for federal taxes is where the money is turned over. The payment should be accompanied by a federal deposit form.
Business owners have to pay these taxes to the IRS, whether monthly or quarterly, dependent on the size of the payroll. What is actually happening here is that your business is a collecting agent for the government. Your employee’s taxes are entrusted to you until you make the payment.
The IRS also requires business owners to submit:
- Form 940 (Employer’s Annual Federal Unemployment Tax Return) yearly. This reports your total quarterly payroll tax deposit. This deposit amount determines the federal unemployment tax. This tax is paid by the business. This tax doesn’t come out of the employee’s paychecks.
- Form 941 (Employer’s Quarterly Federal Tax Return) every 3 months. This form reports the figure of your employee’s federal income tax and FICA that was withheld the previous quarter.
Most business are neglectful in paying and filing employment taxes, according to the IRS. It’s considered that a business that has not paid taxes as illegally borrowing funds from the U.S. If you need to pay tax debt, revenue officers can close your business and seize assets.
Pay Uncle Sam first – make settlling taxes a priority to minimize your business’ payroll tax problems. Utilizing a bonded payroll tax service is an option to think about. The service takes care of filing and making payroll tax deposits. The penalty for late forms or late payments are paid by the service.
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