Every employer must:
• Withhold payroll taxes from employees’ wages
• Deposit the withheld employee income taxes, together with the business’s share of Social Security and Medicare taxes, to the accounts of the IRS and the state (Monthly or semi-weekly).
- Electronic Federal Tax Payment System (EFTPS).
• File various reports with the IRS, Social Security Administration, and the state.
- Validate social security #s with Social Security Administration (SSA) at 800-772-1213
What Are Payroll Taxes?
- Income Tax: withhold federal income tax
By February 28
- Employers must file IRS Form W-3 (summary and transmittal form)
- Send copies of all the W-2s to the Social Security Administration, which shares this data with the IRS
- Social Security and Medicare Tax (FICA)
- Consists of a social security tax of 6.2%, and a Medicare tax of 1.45%. The combined 7.65% tax rate must be paid by both the employer and the employee for a total FICA tax of 15.3%.
- Employers are required to withhold the employee’s 7.65% share to then match it. Paid half and half…
- Federal Unemployment tax (FUTA): FORM 940. DUE JAN 31
This tax goes to the unemployment insurance system and is paid by the employer. The employee pays no part of FUTA. The maximum FUTA is $42 per employee per year. A credit toward FUTA is allowed for any state unemployment taxes paid, but the employer must have paid the state unemployment tax on time. (A sample Form 940 is below.)
- Form 940 (or Form 940-EZ), Employer’s Annual Federal Unemployment (FUTA) Tax Return. Obtain this from the IRS by calling 800-829-1040 or at www.irs.gov. This is a once-a-year form to report and pay the employer’s unemployment tax to the IRS and claim credit for payments made to any state unemployment agency. (A sample form is shown below.)
Deadlines
- Employer’s Quarterly Federal Tax Return. Form 941, Employer’s Quarterly Federal Tax Return. You can obtain this from the IRS website (www.irs.gov) or an IRS office. But if you’re using QuickBooks (Intuit) or similar accounting software, it will generate and fill in Form 941 for you. Form 941 must be filed four times a year. It reports your federal payroll tax deposits for a three-month period. It also shows how many employees your business had in that period. (Sample form follows.) If you discover an error in your Form 941, file Form 941-X to correct it.
- Form 944, Employer’s Annual Federal Tax Return. A very small business will use this form instead of Form 941 because it’s for an employer who owes withheld federal income taxes and FICA of $1,000 or less. File and pay this only once a year instead of every quarter. Correct any errors in Form 944 by filing Form 944-X.
January 31
- Federal Unemployment Tax (FUTA): Form 940
- Employers must file IRS Form W-3 (summary and transmittal form) and Send copies of all the W-2s to the Social Security Administration, which shares this data with the IRS www.ssa.gov
- Copies of any 1099s and W-2s to the IRS.
- Form 1096 filed to the IRS
- Form 8027 with the IRS of employees receive tips.
- Form 944 if applicable
