Payroll Tax Requirements
Let’s discuss and identify the payroll taxes that an employer must pay and what happens if you fail to pay the taxes. A rather complete discussion about payroll taxes will be found in the IRS Publication 15, or more commonly known as Circular E.
FICA (Social Security)
The Social Security tax is not paid on all wages. The maximum wages taxed in 2012 is $110,100. So for the first $110,100 in wages the employee will pay $4,624. The employer will pay $6,826.20. If you happen to be self employed, the maximum that you will pay in Social Security taxes is $11,450. These taxes are paid to the United States Treasury annually, quarterly, monthly, semi-monthly or with every payroll. The vast majority of employers will remit this tax either quarterly, monthly or with every payroll.
In my practice, we would refer to the Federal Withholding, Social Security and Medicare taxes as 941 taxes. These are taxes that are reported quarterly to the IRS on Form 941 . Form 941 is a reporting to the IRS to reconcile the wages paid, the taxes associated with the wages paid, and finally to account for all required payroll tax deposits. Since January 1, 2011, these taxes must be paid online via EFTPS. If your total taxes owed on Form 941 are less than $2,500, you need to remit the tax payment, quarterly. This is known as the default payment frequency. This is important to understand, because you may not need to pay your taxes more frequently than quarterly and any penalties for failing to pay your taxes will be reduced if your payment frequency is quarterly.
If your total taxes exceed $2500, at a minimum the employer must pay the taxes monthly. A monthly filing requirement would require the employer to pay via EFTPS the payroll taxes by the 15th of the month following the month the payroll check was dated. January’s payroll taxes are due February 15th. If the employer’s total taxes over a 12 month period exceed $50,000 the employer must deposit the tax payment within 5 days of the date on the payroll check.
Federal Unemployment Tax (FUTA)
FUTA tax is reported annually on Form 940 . Most employers pay this tax quarterly, via EFTPS, then the employer files a Form 940 annually to reconcile the wages paid to the taxes owed and the taxes deposited. Typically, an employer will calculate and pay this tax when they prepare the employer’s quarterly payroll tax reporting. Then the employer will prepare and file Form 940, when the employer prepares the annual W-2 reporting.
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