Employment Taxes What Are They

Employment Taxes – What Are They?
If you​ have employees,​ you​ are responsible for paying a​ variety of​ taxes at​ the​ federal,​ state,​ and local levels .​
You must also withhold certain taxes from the​ paychecks of​ your employees .​
So,​ what are employment taxes?
Employment taxes include the​ following.
1 .​
Federal income tax withholding
2 .​
Social Security and Medicare taxes
3 .​
Federal unemployment tax (FUTA).
Federal Income Taxes/Social Security and Medicare Taxes
You generally must withhold federal income tax from wages paid to​ an​ employee .​
Form W-4 is​ used to​ determine the​ specific amount,​ although most payroll services or​ your accountant will do this for you.
Social security and Medicare taxes pay for benefits that workers and families receive under the​ Federal Insurance Contributions Act (FICA) .​
Social security tax pays for benefits for the​ retired,​ survivors,​ and disability insurance distribution provisions of​ FICA .​
Medicare tax pays for benefits under the​ medical care provisions of​ FICA .​
As an​ employer,​ you​ must withhold a​ percentage of​ these taxes from employee and match the​ withholding amount.
In general,​ you​ must deposit these taxes by check or​ cash to​ an​ authorized financial institution,​ typically your bank .​
Check with your tax professional to​ make sure you​ are not required to​ use the​ Electronic Federal Tax Deposit System (EFTPS) .​
Regardless of​ the​ payment method,​ you​ will then report them on​ Form 941,​ the​ Employer’s Quarterly Federal Tax Return
Federal Unemployment Tax (FUTA)
FUTA is​ a​ combined federal and state program that provides unemployment compensation to​ the​ unemployed .​
As a​ business owner,​ you​ are solely responsible for paying this tax,​ to​ wit,​ nothing is​ withheld from the​ paychecks of​ your employees .​
FUTA is​ determined by using Form 940,​ but you​ are encouraged to​ use a​ tax professional to​ determine payment amounts.
Employment taxes can be frustrating for a​ small business owner .​
They are,​ unfortunately,​ a​ necessary evil as​ your business grows.

You Might Also Like:

Powered by Blogger.