If you have employees, you are responsible for payroll taxes. This is a term that lumps all the different forms of employment taxes into one category known as ?payroll tax?. In reality, payroll taxes encompass Federal and state income tax withholding, social security and Medicare taxes (also known as FICA), Federal unemployment tax (FUTA), as well as any state and local unemployment taxes assessed.
Payroll taxes are deducted each pay period from an employees gross pay. The remaining money distributed to the employee is what is known as ?net pay?. Along with any taxes deducted from an employee's wages, there is a social security and Medicare liability incurred by the employer. You must match the social security and Medicare amounts withheld on each employee.
This is the employer paid contribution. Until recently, most employers reported and paid payroll taxes quarterly. With the advent of the EFTPS, or Electronic Federal Tax Deposit System, taxes are now paid on a monthly basis by all employers. The payroll taxes may also be paid via a tax coupon that is taken to your bank and presented with the monies to cover the payroll taxes due.
Every quarter, a Form 941 (or 943 for Agricultural employees) must be filed with the IRS. The amounts reported on the 941 should reconcile to the amounts turned in each month via the tax coupon or the EFTPS. At the end of the tax year, a Form 940 or information return must also be filed. If you are a small business with employees, or you plan to begin operating a business with employees, you need to understand your tax responsibilities as an employer.
The IRS provides links to all the relevant Forms and Publications via their internet site at www.IRS.gov . Here you will find definitions and terms associated with employees from the onset of hiring, to termination. W-4's, W-2's, I-9's, all the employment taxes you will be responsible for reporting, all the rates associated with those taxes.
The IRS also provides you with information concerning recordkeeping, employment eligibility verification, benefit and retirement plans, and even the definition to be used in order to determine if someone is an employee.
There is a tremendous benefit to be had by investing the time and resources necessary to understand and comply with all the federal, state, and local regulations concerned with employees and payroll taxes. However, you should frequently seek the advice of a qualified tax professional, your accountant.
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If you're just starting a business for yourself, one thing you will want to remember during this hectic time are payroll taxes. Even though you have many a number of projects that you want to get started on, clients to find, and deadlines to meet ? not to mention, paperwork to file, you should take the time to check out all that is involved in payroll taxes.
Many times, a self employed worker can find him or herself caught up in their business life without giving their taxes a second thought. This is not the best way to begin your new business. Most importantly, if you're running a business with employees, you will need to learn about payroll taxes, what they are, and how they will be involved in your business interactions.
While you may feel like your business is something that's certainly getting off the ground, you need to be able to show this to the government as being true. You need to prove to this agency that you aren't just messing around with a hobby that you enjoy ? even if it was a hobby that launched into something more, and that you do understand what you are doing regarding payroll taxes.
There are two names for payroll taxes - pay as you earn and pay as you go. For most of us, we already know about pay as you earn payroll taxes. If you've ever had a traditional job, you will realize on your checks that certain taxes are taken from the gross amount. The taxes that an employer is required to take out include federal income tax, medicare tax, social security and possibly state and/or city taxes.
There are some employers that are not required to take out payroll taxes such as Medicare or the Social Security taxes ? these are employers like those that are state funded or affiliated. This is because you will see another deduction from your paycheck that goes toward a state funded pension plan.
At this time, employers are required to take out 6.2% of the employee's earnings in payroll taxes such as Social Security and 1.45% for Medicare. But in addition to these taxes, employers also are required to pay unemployment taxes for their employees, in the occasion that the employee is fired and needs to collect unemployment checks.
These kinds of taxes are used at the state and at the federal level so that there is sufficient for future use. While the federal level is around 6.2% for the withholding for this unemployment tax, since employers can get a create toward the state unemployment taxes that they pay, it often comes out to being less than 1% of the overall income grossed.
Whatever your function in the world of taxes, weather you are a working individual paying tax on what you earn or an employer in the beginning stages of building your business, it is a good idea to become informed on the different requirements and responsibilities of paying the IRS through payroll taxes.
Both Matt Bacak & Arthur Manford Chambers Iii are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Matt Bacak has sinced written about articles on various topics from Writing, Web Development and Advertising Guide. Matt Bacak, The Powerful Promoter and Entrepreneur Magazine e-Biz radio show host, became a "#1 Best Selling Author" in just a few short hours. He has helped a number of clients target his specialty, opt-in email direct marketing systems. The Powerful Pro. Matt Bacak's top article generates over 110000 views. to your Favourites.
Arthur Manford Chambers Iii has sinced written about articles on various topics from Career Change, Tax and Career Change. Arthur Manford Chambers III is a financial and tax planner who enjoys sharing tips on and offers extensive free tax guides, and a free "special rep. Arthur Manford Chambers Iii's top article generates over 246000 views. to your Favourites.