Payroll Tax Responsibilities
Listed below is a summary of your payroll tax responsibilities if you are or become an employer.
This information is not intended to be all inclusive.
A. PAYROLL TAXES:
1. Each Employee Must File a Form W-4 with You - This must be kept permanently in an employee file. This form provides you with the information you need to calculate Federal income tax withholding.
2. Each Employee Must Also File a Form I-9 with You - This must be kept permanently in the employee file. This form provides proof that the employee is eligible for employment in the United States.
3. Withholding Federal Income Taxes - You should receive from the IRS an Employer's Tax Guide, commonly referred to as "Circular E", or Publication 15, depending on the size of your company's payroll. These publications provide you with tables to calculate income tax withholding amounts for each paycheck. In order to calculate this, you will need the number of exemptions and filing status (married or single) which were provided to you by your employees on Form W-4.
4. Employee Social Security and Medicare Taxes (FICA) - For Jan. 1 - Feb, 29, 2012, the Social Security tax rate is 4.2% and is withheld on wages up to $110,100. The tax rate for Medicare is 1.45% and is withheld on all wages paid.
5. In summary, an employee's gross pay less Federal income tax withheld per the tables in Circular E (or Publication 15), less Social Security tax withheld (4.20% of gross pay), less Medicare tax withheld (1.45% of gross pay), would equal net pay. The net pay would be the amount of the check that the employee would receive.
6. Employer Social Security and Medicare Taxes (FICA) - Employers are also subject to FICA taxes. The employer's portion of the FICA tax is 6.20% of gross pay for Social Security plus 1.45% of gross pay for Medicare. The wage limitations that apply to the employee's portion of Social Security taxes also apply to the employer's portion.
B. PAYROLL TAX DEPOSIT REQUIREMENTS:
1. The sum of the Federal income taxes, Social Security taxes and Medicare taxes withheld from your employees, plus the employer's portion of the Social Security tax and Medicare tax, represents the amount required to be deposited.
2. New employers are considered monthly depositors during their first year as employers however If, a new employer accumulates a tax liability of $100,000 or more on any day during the deposit period, a deposit must be made on the next banking day.
3. For employers who have previously filed payroll tax returns, if your deposit liability for the look back period (the period starting July 1 and ending June 30 of the previous year) is less than $50,000, you will be a monthly depositor. Otherwise, you will be a semi-weekly depositor. In either case if an employer accumulates a tax liability of $100,000 or more on any day during the deposit period, a deposit must be made on the next banking day.
If you are a monthly depositor, you must make a deposit by the 15th of the following month. Semi-weekly depositors are required to deposit payroll taxes each Friday for taxes withheld on payrolls paid the previous Saturday, Sunday, Monday, or Tuesday. Deposits should be made each Wednesday for taxes withheld on payrolls paid the previous Wednesday, Thursday, or Friday.
Payroll tax deposits must be made using the Electronic Federal Tax Payment System (EFTPS).
C. ELECTRONIC FEDERAL TAX PAYMENT SYSTEM (EFTPS)
EFTPS replaces the practice of taking a paper tax deposit coupon to the bank whenever a deposit is due. The taxpayer must transfer funds for the required deposits out of its bank account to the Treasury account by simply making a phone call or communicating through its computer equipment.
D. FILING FORM 941, EMPLOYERS QUARTERLY FEDERAL TAX RETURN:
At the end of each quarter, you are required to file Form 941 with the IRS. The information needed for this return is total Federal, Social Security, and Medicare taxable wages and total Federal income taxes withheld for the quarter. In addition, a summary of your payroll tax liability is required. The due dates are:
| 1st Quarter | Ends On: 3/31/2011 | 941 Due By: 4/30 |
| 2nd Quarter | Ends On: 6/30/2011 | 941 Due By: 7/31 |
| 3rd Quarter | Ends On: 9/30/2011 | 941 Due By: 10/31 |
| 4th Quarter | Ends On: 12/31/2011 | 941 Due By:1/31/2013 |
E. W-2's:
At the end of each year, you are required to issue to your employees Form W-2. This must contain the employee name, address, social security number, gross pay for the year, and Federal Income tax, Social Security tax, and Medicare tax withheld for the year. W-2's must be issued to employees by January 31. In addition, you are required to send to the Social Security Administration, Copy A of the W-2 along with a W-3 by the last day of February.
F. FEDERAL UNEMPLOYMENT TAXES:
Employers are also subject to Federal Unemployment taxes (FUTA). The effective tax rate for 2012 is 0.6%. The tax is assessed on the first $7,000 in wages paid to each employee. At the end of any quarter in which your unemployment tax liability is $500.00 or more, you are required to make a deposit. Deposits are made in the same manner as payroll taxes, using the EFTPS system. In addition, at the end of the year, you are required to file Form 940, Federal Unemployment Tax Return. This return is due by January 31.
G. STATE UNEMPLOYMENT TAXES:
Employers are subject to State Unemployment taxes. The tax rate is set by the State for each company, and is due on each employee's wages up to $14,000. New Employers in New Hampshire are assigned a rate of 3.7%. The tax is paid at the end of each quarter with the Quarterly Unemployment Tax Return. The due dates for filing are the same as filing Form 941. If you do not file your State unemployment returns on time, your federal unemployment tax rate will increase to 6.2%.
H. TIP REPORTING:
Companies employing workers who receive tips in addition to their regular wages are subject to specific reporting and record-keeping requirements. Tipped employees must report all tips earned to their employer. The employer must withhold Federal income tax and FICA taxes from the employee on the reported tips.
Employers are allowed to reduce the minimum wage paid to tipped employees by taking a "tip credit". This is permitted because, generally, tips received by an employee when added to the reduced minimum wage result in overall earnings above minimum wage. Calculations must be made by the employer to ensure that all tipped employees are receiving at least minimum wage. If any are not, the employer must pay them a "minimum wage adjustment" to bring them up to minimum wage.
Employers are required to provide all tipped employees with a means of recording tips earned on a daily basis. It is the responsibility of the employee to report all tips to the employer, and to keep records of all tips reported. Food and beverage establishments are required to file Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, with the IRS. This form discloses sales of the establishment and actual tips reported. If tips reported are not at least 8% of sales, additional tips need to be allocated to the employees to bring the total tips up to 8% of sales.
I. New Hire Reporting:
Welfare reform legislation requires all employers to report certain information on "new hires" to a designated state agency. In New Hampshire that agency is NH Employment Security (NHES). When "new hire" data is matched against the names of child support debtors on the state and national levels, the Office of Child Support Enforcement is able to locate and collect child support from non-custodial parents living here and in other states.
"New Hires" include all newly hired and rehired employees. "New Hires" also include all individuals with whom you contract for services if, (1) The individual is a sole proprietor or individual contractor, and (2) You expect to, or in fact reimburse the contractor at least $2,500 for services for one or more contracts in a calendar year's time. "Contract for services include oral, written, formal and informal agreements." Rehires, reportable under the program, are those employees who return after a permanent separation, and those who perform no work for you for 26 consecutive weeks or more, regardless of the reason for the break in service.
For any questions about this or any info , Call Toll Free: (877) 644-2004 and one of our Payroll Specialists can fill you in on the details and show how Checkmate provides easy, fast and accurate processing solutions.
Disclaimer
Please Note: This outline is intended as general guidance and not specific legal or tax advice. Your legal counsel and/or accountant should be consulted with specific questions or for advice on how to proceed with these matters.