MORE ON TAXES
© Barbara Massie
Whether you are incorporated or operate as an sole-proprietorship, when employees are hired, your payroll responsibilities begin. You should understand the basics of payroll taxes whether you pay to have them done by an outside agency, or person, or if you tackle the job yourself. Read more about Filing and Paying Business Taxes.
Contact your local IRS office and ask for free forms, To locate
the nearest office check in the telephone directory in the listing for
federal offices. You may download forms from the IRS.GOV site. Forms such as:.
Publ 334 Tax Guide for Small Business
Publ 509 Tax Calendars
Publ 583 Taxpayers Starting a Business
Publ 910 Guide to Free Tax Services
These give you the information needed for tax instructions, a checklist
and a calendar of due dates for filing returns and paying taxes.
RECORDS OF TRANSACTIONS
Money withheld from an employees pay, money paid by you to the government and all business transactions completed in the name of your business should be recorded and kept separate from personal transactions.
It is very important to deposit all of the money taken in or paid out of the business in a separate bank account. A business check should be used for every payment made from your business. Order checks through your bank. Pay taxes to the government with a business check and record all backup documentation with a record of each transaction. Very small purchases of $1.25, for example, are a different story. Small expenditures are commonly called and paid from a Petty Cash Account. Learn how to set up and handle a "petty cash" account to keep check writing at a minimum.
FEDERAL IDENTIFICATION NUMBER
Any business with one or more employees must file Form SS-4 with the IRS to receive an Employer Identification Number (EIN). There is no fee for this. Information about this was found when you went into the article on "Filing & Paying business Taxes." This number is used by the government to track your business income tax returns and your payroll tax returns. It helps verify that you are paying all appropriate employer taxes and withholding the proper amounts from employee paychecks. Corporation and partnerships must have an EIN regardless of whether they have employees or not. Sole proprietors need an EIN only if they have a Keogh retirement plan or hire an employee.
FEDERAL INCOME TAX
To determine how much federal income tax to withhold from an employee's earnings, you must have the employee fill out a Form W-4 - Employee's Withholding Allowance Certificate. Read all of the information about the Circular E online. Once you know the employee's salary, marital status and number of exemptions being claimed on their Form W-4, you can determine
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