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Understanding Employee Taxes
Employee taxes can be one of the most difficult to understand
areas of running a business and hiring employees. If you don't
understand all of the complexities involving employee payroll
tax, it can also get you into a heap of trouble.
The first employee tax factor you should understand is what
taxes you are responsible for as an employer. There are three
employee taxes that you will be responsible for paying.
The first is Medicare and Social Security tax. This is often
referred to as FICA and provides welfare benefits funding for
senior citizens. As an employer you are responsible for paying
half of the FICA taxes and withholdings for your employee while
the remaining half is withheld from their paycheck.
You are also responsible for paying federal unemployment tax.
This tax funds the state unemployment benefits and the
administrative costs associated with those benefits. It is
important for you to know that you must pay federal unemployment
tax on the first $7000 earned by each person you employ during
the calendar year.
In addition to federal unemployment tax, you must also pay state
unemployment tax. These taxes are based on the location and size
of your business as well as the number of employees you employ.
Due to the fact that each state operates its own unemployment
program, these rates do tend to vary; so it's best if you check
with your own state's unemployment division for specific
details.
In addition to the taxes you must pay as an employer, you are
also responsible for withholding employee tax. Even though this
is the employee's contribution, it is your responsibility to
handle the employee tax withholding. You will need to pay close
attention to the employee tax form, or W-4, completed by the
employee in order to know exactly how much money you need to
deduct from the employee's paycheck. Usually the amount of money
you must withhold will depend on the number of
Associated Websites
withholding
allowances claimed by the employee, their marital status and any
exemption from withholding taxes that the employee might claim.
It is very important that you stay on top of your employee's tax
forms because they have the right to change them by submitting a
new W-4. If an employee submits a new employee tax form, thereby
changing the amount of their withholding and you fail to deduct
the correct amount of money, you could be subject to penalties
by the IRS.
You will need to deposit both the taxes that you are responsible
for paying along with the employee tax withholdings in an
authorized depository for Federal taxes. You can do this by
either mailing or delivering your check or money order. These
taxes will be due either semi-weekly or monthly. Your employee
tax withholding due dates will be determined by the size of your
payroll, dictated by the schedule. Usually, however; if your
payroll is less than $2,500 every three months, you can file
quarterly. If your employee taxes are larger, you'll need to
file more often.
In addition to the employee taxes named above, recently there
has been much discussion in the media regarding a proposed
employee health tax. If instituted this tax would impose a $3000
tax on employers for each employee who is not covered by health
insurance. The intend of the proposed bill is to force employers
to cover more employees by health insurance; however critics of
the bill claim that the proposed employee health care tax will
only lead to more unemployment.
About the author:
Matt Bacak became "#1 Best Selling Author" in just a few short
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Stories. Discover The Secrets To Unleash The Powerful Promoter
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or http://promotingtips.com
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