Payroll Taxes

Copyright (c) 2007 The Powerful Promoter

If you have employees, you are responsible for payroll
taxes.  This is a term that lumps all the different forms
of employment taxes into one category known as “payroll
tax”.  In reality, payroll taxes encompass Federal and
state income tax withholding, social security and Medicare
taxes (also known as FICA), Federal unemployment tax
(FUTA), as well as any state and local unemployment taxes
assessed.

Payroll taxes are deducted each pay period from an
employees gross pay.  The remaining money distributed to
the employee is what is known as “net pay”.  Along with any
taxes deducted from an employee’s wages, there is a social
security and Medicare liability incurred by the employer.
You must match the social security and Medicare amounts
withheld on each employee.

This is the employer paid contribution. Until recently,
most employers reported and paid payroll taxes quarterly.
With the advent of the EFTPS, or Electronic Federal Tax
Deposit System, taxes are now paid on a monthly basis by
all employers.  The payroll taxes may also be paid via a
tax coupon that is taken to your bank and presented with
the monies to cover the payroll taxes due.

Every quarter, a Form 941 (or 943 for Agricultural
employees) must  be filed with the IRS.  The amounts
reported on the 941 should reconcile to the amounts turned
in each month via the tax coupon or the EFTPS.  At the end
of the tax year, a Form 940 or information return must also
be filed.  If you are a small business with employees, or
you plan to begin operating a business with employees, you
need to understand your tax responsibilities as an employer.

The IRS provides links to all the relevant Forms and
Publications via their internet site at www.IRS.gov .  Here
you will find definitions and terms associated with
employees from the onset of hiring, to termination.  W-4’s,
W-2’s, I-9’s, all the employment taxes you will be
responsible for reporting, all the rates associated with
those taxes.

The IRS also provides you with information concerning
recordkeeping, employment eligibility verification, benefit
and retirement plans, and even the definition to be used in
order to determine if someone is an employee.

There is a tremendous benefit to be had by investing the
time and resources necessary to understand and comply with
all the federal, state, and local regulations concerned
with employees and payroll taxes.  However, you should
frequently seek the advice of a qualified tax professional,
your accountant.

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Matt Bacak, The Powerful Promoter and Entrepreneur Magazine
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