Want to know more about payroll tax filing and be ready when the time comes? Keep on reading!<\/p>\n\n\n\n\n\n\n\n\n
The first thing any small business owner has to remember is that if you have employees, you’ve got to follow the federal employment tax rules and keep up with changing regulations. Easier said than done! Stats are disappointing<\/a> and show that 40% of small businesses pay an average of $845 payroll tax fines each year.<\/p>\n\n\n\n Failure to pay payroll taxes or missing the obligatory payment may result in costly fines and penalties. But there’s something even worse – you can get a real prison sentence<\/a>. <\/p>\n\n\n\n The bottom line is clear: negligence with payroll<\/a> tax calculations and payments can be ruinous! But forewarned is forearmed, as they say. Let’s break down payroll taxes and make sure you can keep your business on the safe side. This article will provide you with a detailed guide on payroll taxes that an employer has to pay.<\/p>\n\n\n\n <\/p>\n\n\n\n 1. Payroll tax definition<\/a><\/p>\n 2. How to make payroll tax calculations?<\/a><\/p>\n\t 3. Payroll tax deposit schedule and rules<\/a><\/p>\n\t 4. Payroll tax forms<\/a><\/p>\n 5. Common payroll tax filing mistakes for a small business to avoid<\/a><\/p>\n\n\n\n <\/p>\n\n\n\n Payroll tax<\/a> is money deducted from every employee\u2019s paycheck by an employer and remitted to the government on the employee\u2019s behalf. \u201cPayroll taxes\u201d is actually an umbrella term, as employers are required to withhold state and federal income taxes, as well as some other taxes.<\/p>\n\n\n\n You have to take care of a few things to make it through payroll tax filing unscathed.<\/p>\n\n\n\n First things first \u2014 when you hire your first employee you need to get a federal employer identification number (EIN). You may also need to get state and local tax numbers for payroll tax filing. The EIN will be used on your deposits, returns, and other related documents. Now, you are a legal employer complying with federal payroll tax rules! As an employer, you have obligations to the government and tax agencies \u2014 the IRS (Internal Revenue Service) and SSA (Social Security Administration), as well as to your employees.<\/p>\n\n\n\n By federal law, employers are required to make contributions to fund social programs, such as Social Security, Medicare, Social Insurance and Retirement programs, etc. There may be state and local payroll tax withholdings, as well. <\/p>\n\n\n\n All in all, small business payroll tax rules require an employer to:<\/p>\n\n\n\n \ud83d\udccc Note:<\/em> you need to make all federal tax deposits through the Electronic Federal Tax Payment System (EFTPS).<\/p>\n\n\n\n payroll tax<\/strong> consists of <\/p>\n\n\n\n There are both obligatory and optional payments, which are called, respectively, statutory and voluntary payroll tax deductions. <\/p>\n\n\n\n \ud83d\udccc Note:<\/em> As opposed to payroll taxes, the IRS uses a more official term \u2014 employment taxes<\/em><\/strong> \u2014 to describe an employer\u2019s obligations to the government. People may find this intersection of terms confusing, but they are generally the same, excluding the self-employment tax. Self-employment tax falls into the category of employment taxes, not payroll taxes, because as a small business owner, you\u2019re self-employed, and you don\u2019t pay yourself a salary. <\/p>\n\n\n\n The IRS has common law rules which include a series of tests:<\/p>\n\n\n\n Use these tests to identify taxable employees and make payroll tax filing easier. <\/p>\n\n\n\n You need to calculate gross pay \u2014 the total amount of money you paid your employee is comprised of hourly wages, overtime pay, bonuses, profit sharing, gifts to an employee, and all other kinds of compensation. <\/p>\n\n\n\n Now you have to figure out the percentage to withhold for federal, state, and local taxes, as well as FICA and FUTA.<\/p>\n\n\n\n Statutory small business payroll tax deductions encompass:<\/p>\n\n\n\n After the statutory payroll tax deductions are calculated, you can think of the voluntary ones. They can only be withheld with the employee\u2019s consent and may include:<\/p>\n\n\n\n After both legally required and voluntary paycheck deductions are subtracted, the employee receives their net pay. Finally, pay (deposit) the calculated payroll tax deductions to the tax agency. <\/p>\n\n\n\n Payroll taxes are paid to the IRS either semi-weekly or monthly. Payroll tax deposit due dates depend on how many employees you have and how much payroll taxes you owe:<\/p>\n\n\n\nContents:<\/b><\/h2><\/p>\n\t
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Payroll tax definition<\/strong><\/span><\/h2>\n\n\n\n
Understanding your payroll tax obligations<\/strong><\/span><\/h3>\n\n\n\n
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How much is payroll tax?<\/strong><\/span><\/h3>\n\n\n\n
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How to make payroll tax calculations?<\/strong><\/span><\/h2>\n\n\n\n
Step #1 for payroll tax: determine which workers are taxable<\/h3>\n\n\n\n
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Step #2 for payroll tax: calculate the taxable wages<\/h3>\n\n\n\n
Step #3 for payroll tax: withhold (deduct) percentages from an employee\u2019s paycheck<\/h3>\n\n\n\n
Statutory payroll tax withholding calculations <\/h4>\n\n\n\n
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Voluntary payroll tax withholding calculations<\/h4>\n\n\n\n
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Payroll tax deposit schedule and rules<\/strong><\/span><\/h2>\n\n\n\n
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