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Employee Forms And Taxes:
What Are Employment
Taxes?
Small business owners often have great responsibilities
while operating and managing a business. Before you become
an employer and hire employees, you need a Federal Employer
Identification Number (EIN). If you have employees, you are
responsible for several federal, state, and local taxes. As
an employer, you must withhold certain taxes from your employees'
wages. Employment taxes include the following.
- Federal income tax withholding
- Social Security and Medicare taxes
- Federal unemployment tax (FUTA).
Federal Income
Taxes/Social Security and Medicare Taxes
You generally must withhold federal income tax from your
employees' wages. To figure how much to withhold from each
wage payment, use the employee's Form W-4 and the methods
described in Publication
15, Employers Tax Guide and Publication
15-A, Employers Supplemental Tax Guide.
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 under the
old-age, survivors, and disability insurance part of FICA.
Medicare tax pays for benefits under the hospital insurance
part of FICA. You withhold part of these taxes from your employee's
wages and you pay a matching amount yourself.
Which form do I file to report federal Income Taxes, Social
Security, and Medicare taxes?
- Form 941, Employer's Quarterly Federal Tax Return
- Form 943, Employer's Annual Federal Tax Return for Agriculture
Employees (For use by farm employers)
Federal Unemployment
(FUTA) Tax
The federal unemployment tax is part of the federal and
state program under the Federal Unemployment Tax Act (FUTA)
that pays unemployment compensation to workers who lose their
jobs. You report and pay FUTA tax separately from Social Security
and Medicare taxes and withheld income tax. You pay FUTA tax
only from your own funds. Employees do not pay this tax or
have it withheld from their pay. Report FUTA taxes on Form
940, Employer's Annual Federal Unemployment (FUTA) Tax Return.
Depositing Taxes
In general, you must deposit income tax withheld and both
the employer and employee Social Security and Medicare taxes
(minus any advance EIC payments) by depositing electronically,
mailing or delivering a check, money order, or cash to a financial
institution that is an authorized depositary for federal taxes.
You can make your deposits using Electronic Federal Tax Payment
System (EFTPS). This is a tax payment system provided free
by the U.S. Department of Treasury, which allows businesses
to pay federal taxes electronically via the Internet or phone
24/7. Visit
EFTPS for more information or to enroll. Some
taxpayers are required to deposit using the EFTPS. See Publication
15, Employer's Tax Guide, under How to Deposit
- Electronic Deposit Requirement.
Certain Taxpayers
May Now File Their Employment Taxes Annually
To reduce burden for certain small business taxpayers, employers
who have an Employment Tax liability of $1,000 or less for
the year will now file Form
944, Employer's Annual Federal Tax Return, instead
of Form 941,
Employer's Quarterly Federal Tax Return. Eligible
taxpayers will be notified by mail.
Preparing and
Filing Form W-2
At the end of the year, the employer must complete Form
W-2, Wage and Tax Statement (PDF). A copy of this
form must be given to the employee by January 31st after the
end of the year. You must also send a copy of the W-2 to the
Social Security Administration (SSA) by February 28th (after
the end of the year) unless you file it electronically --
then it is due on March 31st. Employers can prepare and file
up to 20 W-2s at a time, free of charge, at the Social Security
Administration's Web site. Using SSA's online W-2 filing,
employers can also print out all the necessary copies of the
W-2 for their employees, state taxing agencies, etc.
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