What You Have To Know About Payroll Taxes

You withhold taxes from employees' paychecks each pay period if you run your own business. These taxes are for federal (and possibly state) income tax and FICA contributions (Social Security and Medicare). The amount of income tax withheld is based on the number of exemptions every employee claimed when the individual started working . A fraction of the employee's gross earnings goes to FICA contributions. The FICA amount need to be matched by the business, in full or partially. A bank accredited as a depository for federal taxes is where the money is deposited. The payment must be accompanied by a federal deposit form.

Your business serves as the government's collecting agent, holding your employees' taxes in trust until you make the payment to the IRS, either quarterly or monthly.

The IRS also requires business owners to submit:

• 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 last three months.
• Form 940 or Employer's Annual Federal Unemployment Tax Return reports your total quarterly payroll tax deposit, the amount utilized to determine federal unemployment tax that must be paid by the business, not the employees, and is submitted once a year.

According to the IRS, numerous businesses are delinquent in filing and in paying their employment taxes occasionally. Businesses that have not paid taxes are illegally borrowing funds from the government. Know that revenue officers can actually seize your assets and close your business if you need to pay back taxes.

Pay Uncle Sam first – make settlling taxes a priority to lessen your payroll tax issues. Using a bonded payroll tax service is something to think about. The service is responsible for filing and doing payroll tax deposits. Then, if there is a late payment or form, the service pays the late payment penalty.

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Originally posted 2007-11-17 04:00:58. Republished by Blog Post Promoter

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