A LAST LOOK
© Barbara Massie
Let's take a last look employees taxes and other some other concerns.
FICA WITHHOLDING
When you worked for someone else, you could just complain about
FICA (Federal Insurance Contributions Act); as an employer, you now have
to calculate it. Learn more about all Employment Taxes here.
FICA is actually two separate taxes: Social Security and Medicare:
Social Security Online is an excellent source for all information about Social Security taxes. You must withhold 6.2 percent of an employee's pay on only the first $62,700 of salary. Even if you are a long way from meeting the limit, the quarterly Form 941 Payroll Tax Return will require you to account for the Social Security and Medicare taxes separately.
The Medicare tax of 1.45 percent must be withheld on an employee's
entire salary.
In addition to withholding these FICA taxes from your employee,
employers are required to pay a matching amount to the IRS.
FICA AND FEDERAL DEPOSITS
When your combined employer and employee FICA and federal taxes for all employees total less than $500 in a quarter, you can pay the entire amount when you file your quarterly Form 941 - Payroll Tax Return. If, however, you owe more than $500 in FICA and federal payroll taxes, you qualify as a monthly depositor and must deposit the payroll taxes by the 5th day of the following month. Again go to the site about Employment Taxes and reread the paragraph and hints on "Budgeting for your share of the payroll taxes."
Monthly deposits must be made with Form 8109 and the taxes deposited with a Federal Reserve or authorized commercial bank. The IRS is phasing in mandatory electronic filing of federal payroll taxes. The IRS will notify you when you hit the threshold for mandatory electronic filing, which can be done via your personal computer, over the telephone, or through your bank. IRS publication 937, Employment Taxes and Information Returns has more information.
FEDERAL UNEMPLOYMENT TAX
You must pay FUTA (Federal Unemployment Tax Act) tax on behalf of your employees if you meet one of two criteria: You paid total wages for one or more employees of $1,500 or more in any quarter of the year, or you had at least one employee who worked at least one day during each of 20 different weeks of the year.
The rules for federal unemployment tax are also explained in Circular E. Contact your state Department of Revenue for requirements for state unemployment tax.
At the end of each calendar year the employees must be handed a W-2 - Waged Tax Statement showing a total of their wages earned and taxes withheld for the year. As you know, these are filed with the individuals
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