Every employer must report and deposit payroll taxes on time. The IRS mandates employers to provide an accurate record of the total income of employees and the amounts withheld. It is, therefore, important for employers to know the steps involved in preparing and filing IRS payroll tax returns to avoid mistakes that can have serious repercussions, including heavy penalties. Continuing on the subject, in this blog post, we explain the basics of payroll taxes and how to pay payroll taxes to the IRS. Take a look.
Taxes Included in Payroll Taxes
There are three major types of taxes that are included in payroll taxes, including:
Federal Income Tax
Federal tax income refers to the taxes levied by the IRS on the annual earning of employees, trusts, or any other entities. Such taxes are applicable for any form of earning, including capital gains or employment earnings.
Taxpayers are required to deposit FICA taxes along with the federal income tax. FICA taxes are basically categorized into two parts, including:
6.2% is withheld from an employee and 6.2% is paid by an employer – from wages above $128,400. The total percentage of social security to be withheld/paid amounts to 12.4%.
When it comes to medicare, 1.45% is withheld from an employee and 1.45% is paid b the employer. The total percentage to be withheld/paid amounts to 2.9%.
Federal and State Unemployment Taxes
Federal and state unemployment taxes are solely paid by the employer. These taxes are not withheld from an employee’s wages. In a quarter, if an employees FUTA tax liability is above $500, they need to make quarterly deposits for the tax liability. However, if an employees tax liability is lesser than $500, they are not required to pay any FUTA taxes. In addition, any tax payment remaining at the end of a tax year, it needs to be deposited before 31st January.
Paying Payroll Taxes: Steps Involved
- Issue Form W-4
- Prepare paychecks
- Account for withholding of benefits, taxes and other deductions
- Make deposits of taxes withheld
- Issue Form W-2
- Report the employee taxes withheld, required employer taxes and deposits
The IRS requires employers to report their wages and other forms of compensation that are paid to employees. It is mandatory for every employer to file all the relevant forms to report employment taxes. In addition to income taxes, employers also need to report unemployment and FICA taxes. Once a company has deposited the taxes, they must report the deposited taxes by submitting Forms 940, 941, and 944, either through e-filing or on paper.
IRS payroll taxes may seem simple on the surface; however, it can involve a lot of intricacies that calls for professional expertise. If you are unable to meet your IRS tax debt obligation, speak with an IRS tax attorney at the Law Offices of Nick Nemeth. We have a team of experienced IRS tax lawyers with years of experience in helping individuals and businesses navigate IRS tax debt problems. For a confidential, no-obligation consultation with one of our lawyers, fill out our contact form or simply call (972) 627-4580.