If you are a business owner with employees, you have the responsibility of collecting payroll taxes. While some of these taxes are dependent upon the withholding preference of each employee, the federal and state governments predetermine others. Failure to withhold these taxes and remit them to the appropriate authorities can cause you to have levies or fines imposed upon your business.
Withhold the Appropriate Income Tax
A major aspect of your payroll tax responsibility is to make the appropriate deductions for federal and state income tax on the paycheck of each employee. Before you make the deductions, you'll have to review the completed IRS Form W-4 for each employee to find out how many dependents they are claiming and which marital status they are claiming during the year. You must deduct federal and state income taxes on each employee's earnings according to their wishes on the form.
Deduct FICA Taxes
FICA taxes are another required deduction for payroll department supervisors to make. These taxes include Social Security and Medicare deductions, which must be submitted to the federal government. Along with the employee's portion of these taxes, you'll have to match their contributions with a payment of your own. As of 2011, the Social Security tax is 4.2% for employees and 6.2% for employers, for 10.4%. Medicare taxes are substantially smaller, 1.45% from both employee and employer, for 2.9%.
Remit the Federal and State Unemployment Taxes
Unlike income taxes and one-half of the FICA taxes that are withheld from employee wages, the Federal Unemployment Tax (FUTA) and the State Unemployment Tax (SUTA) come out of your own pocket. You'll have to pay 0.6% of your total employee wages for the FUTA tax. SUTA tax rates vary, according to each U.S. state's regulations.
Submit Your Quarterly Tax Payments
Once you've deducted all of the necessary payroll taxes and set aside funds for your own employer taxes, you must complete a quarterly tax report and submit it along with the corresponding tax payment. This information is completed on an IRS Form 941 "Employers' Quarterly Tax Return". On this form, you'll complete fields that show your total payroll wages for the quarter, total taxes due and total taxes withheld. Each Form 941 includes a pre-printed voucher that you should complete and send along with your tax payment.
Fulfilling your payroll responsibilities as an employer can sound like a complicated task, but doing so is essential to maintaining your compliance with the Internal Revenue Service. If you need assistance completing these duties in a timely manner, you can get help from a qualified payroll tax resolution professional, bookkeeper or certified public accountant.