Paying Payroll Taxes
Business owners may often find it difficult to maneuver through the rules and regulations that determine how much should be paid in payroll taxes and to whom.
Some examples include:
Federal Tax Liability
Examples of federal taxes include:
- Federal income tax
- Employee social security
- Medicare
Deposits are due on a quarterly, monthly, semiweekly, or next day basis depending on the amount of tax liability. However, quarterly and next day deposits are made only on an as needed basis. Employers mandated for EFTPS must make their payments electronically, and file Form 941, Employer's Quarterly Federal Tax Return, quarterly to reconcile taxes calculated versus taxes paid. Smaller employers may have the option of filing one annual Form 944 in lieu of four quarterly Forms 941.
Federal Unemployment Taxes (FUTA)
The Federal Unemployment Tax Act (FUTA) established the employer tax that finances the federal unemployment program. Each covered employer must file a Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, annually to report taxable wages paid during the year and reconcile quarterly FUTA tax deposits.
State and Local Income Taxes
The variety of state and local taxes precludes a detailed description here. In general, every employer who pays employee wages is required to withhold income taxes from each payment of taxable wages, if required by the state or local taxing agencies. Not all states have withholding and many states do not have local taxing jurisdictions that affect payroll.
View State Tax Rates
State Unemployment Insurance (SUI)
All states require employers to pay a state unemployment insurance tax. Although SUI is basically an employer tax, a few states have an employee tax as well. SUI is closely tied to the federal unemployment insurance program FUTA, which is collected from employers; however, compensation benefits are paid from the state fund. If the state fund is depleted, the state may borrow from the federal government.
View SUI Tax Rates
Disability
The primary purpose of disability taxes is to provide benefit payments to employees absent from their jobs because of illness, accident, or disease not related to their employment. Disability taxes provide the fund from which this type of insurance is paid. Plans vary by state, with employers paying the full amount in some states, and employers and workers sharing the cost in others.
Food and Beverage Establishments
Federal and state laws define the responsibilities of the employer and employee and the taxability of different forms of compensation, including tips and gratuities, banquet tips, service charges, meals, and lodging. The employer is required to withhold FICA, federal, state, and local taxes, and pay FICA, federal, and state unemployment insurance on any compensation deemed taxable.
Workers' Compensation
This insurance protects your business from litigation due to an employee's on-the-job illness or injury. Workers' compensation rates are determined by the state and are based on the type of work your employees are doing and their claims experience.
