Payroll Taxes

If you are a business owner, you must withhold taxes from every employee's paychecks every pay period. These are FICA contributions (Medicare and Social Security) and federal and/or state income tax. The number of exemptions each employee claims is the determinant for income tax withheld. FICA is a percentage of the employee's gross earnings. You must match the FICA amount partially or in full. This money is turned over to a bank that's accredited as a depository for federal taxes. A federal deposit form has to accompany your payment.

Depending on the size of your payroll, the taxes are paid to the IRS, either quarterly or monthly. Your business acts as the government's collecting agent. Until payment is made, your employee's taxes are entrusted to you.

Business owners are required to submit:

• Form 940 or Employer's Annual Federal Unemployment Tax Return reports your total quarterly payroll tax deposit, the figure used to determine federal unemployment tax that must be paid by the business, not the employees, and is submitted once a year.
• Form 941 or Employer's Quarterly Federal Tax Return reports FICA and employee's federal income tax withheld for the previous quarter, and is submitted every 3 months.

Though deliquency in filing and paying employment taxes is common with most businesses, the IRS still considers it as illegally borrowing funds from the government, and they can seize your assets and put you out of business if you need to pay tax debt.

Pay Uncle Sam first – make paying your taxes a priority to minimize your business' payroll tax issues. Using a bonded payroll tax service is an option to think about. The service is responsible for filing and doing payroll tax deposits. The penalty for late forms or payments are paid by the tax service.

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