Do you have trouble understanding and complying with the complex IRS payroll regulations for your small business? The IRS website offers tax resources for small businesses with products ranging from printable calendars, online calculators, a series of educational webinars and step-by-step guides. An article published on the CPA Practice Advisor website, helps inform entrepreneurs about the tools available to assist them with employment taxes.

Federal law requires most employers to withhold federal taxes from their employees’ wages. IRS tools can help small businesses understand some of the requirements for withholding, reporting, and paying employment taxes. The IRS website, IRS.gov, provides easily accessible information and guides on what forms employers should use as well as how and when to deposit and report employment taxes.

Federal Income Tax– Small businesses first need to figure out how much tax to withhold. Small business employers can better understand the process by starting with an employee’s Form W-4 and the withholding tables described in Publication 15, Employer’s Tax Guide.

Social Security and Medicare Taxes– Most employers also withhold social security and Medicare taxes from employees’ wages and deposit them along with the employers’ matching share. In 2013, employers became responsible for withholding the Additional Medicare Tax on wages that exceed a threshold amount.There is no employer match for the Additional Medicare Tax and certain types of wages and compensation are not subject to withholding.

Federal Unemployment (FUTA) Tax– Employers report and pay FUTA tax separately from other taxes. Employees do not pay this tax or have it withheld from their pay. Businesses pay FUTA taxes from their own funds.

Depositing Employment Taxes– Generally, employers pay employment taxes by making federal tax deposits through the Electronic Federal Tax Payment System (EFTPS). The amount of taxes withheld during a prior one-year period determines when to make the deposits. Publication 3151-A, The ABCs of FTDs: Resource Guide for Understanding Federal Tax Deposits and the IRS Tax Calendar for Businesses and Self-Employed are helpful tools.

Failure to make a timely deposit can mean being subject to a failure-to-deposit penalty of up to 15 percent. But the penalty can be waived if an employer has a history of filing required returns and making tax payments on time. For more information, see the Penalty Relief Due to First Time Penalty Abatement page on IRS.gov.

Reporting Employment Taxes – Generally, employers report wages and compensation paid to an employee by filing the required forms with the IRS. E-filing Forms 940, 941, 943, 944 and 945 is an easy, secure and accurate way to file employment tax forms. Employers filing quarterly tax returns with an estimated total of $1,000 or less for the calendar year may now request to file Form 944 annually instead. At the end of the year, the employer must provide employees with Form W-2, Wage and Tax Statement, to report wages, tips and other compensation. Small businesses file Forms W-2 and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration and if required, state or local tax departments.

See Understanding Employment Taxes and Employment Taxes on IRS.gov for more.

If you are unsure of what should be done to properly calculate, pay and report these taxes, contact us today for assistance! We are happy to help you and remove this burden from your shoulders. Reach out by phone at 310-534-5577 or by e-mail to [email protected]. We’re here to help! Then insert link to the payroll page on our website.

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