As a business owner, you have a responsibility to the United States to pay payroll tax for all of your non-contracted employees. These wages are figured according to the IRS and are available on the IRS website. While most employers have an accounting program or professional that keeps track of these schedules, it’s important to understand the tax system in order to plan and track payments accurately. This can help keep you from accruing fines and Form 941 (Rev. January 2018)Form 941 (Rev. January 2018)other ramifications that can stem from changing laws or miscommunication.
What Payroll Tax do Employers Pay and When do I Pay Payroll Tax?
For employers, payroll taxes can be paid either semi-monthly or monthly, depending on your company’s tax liability amount. This payment schedule will be arranged at the beginning of the year and will be monthly for businesses who reported less than $50,000 in tax liability in the previous quarters. Semiweekly payments will be arranged for businesses with more than $50,000 in tax liability. If your business is required to pay semiweekly, your payment schedule will depend on your company payday. Monthly paid companies have a due date of the 15th of the following month. Form 941 (or 940) should be filed every quarter reporting the monthly tax amounts made as well as including any leftover balances. Late deposits accrue a 5 percent penalty for every month they are not fully paid.
In general, employers must file a quarterly Form 941 to report each month’s withholdings from employees as well as any taxes paid by the employer. However, if you are a small business owner that paid out $1000 or less during the year in federal and state withholdings, you may be eligible to file a Form 940 Annual Payment form. It’s always best to check with a professional before completing any tax forms, payment, or audits to ensure accuracy.
These taxes will be paid at the local, state, and federal level, and include FICA. They should be paid on every employee that works at your business. Employees are defined as a worker who is controlled by the employer. This includes details such as start and end times, scheduled lunch breaks, driving a company vehicle, or being told in what manner to complete a job. A contract worker is defined as a worker that schedules his or her own work hours, is paid by the job instead of an hourly or salary rate, and drives his or her own vehicle. If you aren’t sure if a worker is contract or employee status, a skilled accountant or tax professional can help.
Figuring Payroll Taxes
How do You Figure Out Payroll Taxes?
Payroll taxes are figured based upon a predetermined schedule provided by the IRS. This schedule is created based upon the rate of pay and dependants for each employee. Because the schedule changes regularly, it’s imperative that you ensure you are using the most up-to-date version to avoid costly fines. Payroll taxes are based on a percentage rate and change depending on the wage amount of the employee. Because of how payroll tax is calculated, you will likely owe a different amount for every employee you have. Current payment schedule charts and payroll tax forms can be found on the IRS website and at your city’s IRS office.
Incorrectly Filed Taxes
What Happens if My Payroll Taxes Are Turned in Late or filed incorrectly?
Business owners often have many tasks and projects to juggle, and sometimes, things can slip through the cracks. If you are late turning in your employer taxes or file incorrectly, you will incur a fine from the IRS which varies according to the late period. If your payment is less than five days late, you will incur a 2 percent late fee. However, if your payment is 6-15 days late, that fee goes up to 5 percent fee on the total and 10 percent penalty is assessed for any payment made 16 or more days late. It’s also important to note the IRS will charge interest on unpaid balances until it is completely paid.
What is Payroll Tax Used for?
Whether you’re an employee or employer, you pay taxes on every dollar you earn. While this may seem like a nuisance, our tax dollars fund vital projects, programs, and committees that help less fortunate, ill, and elderly. Our federal taxes are collected to fund a number of government-affiliated social insurance organizations that help assist elderly, ill, handicapped, and others with disabilities. These funds are also used for programs related to our safety and well-being. Some Programs and organizations affected by taxes are:
- Social Security
- Food Stamps
- Other Low-Income Housing Programs
- Child Abuse and Child Neglect Programs
At the state level, taxes are used for multiple reasons that can include education and school funding, transportation and road work, healthcare, and much more. In fact, they help to fund:
- Low-Income Healthcare
- Correctional Facilities
- State Education Programs
- State College Funding and Grant Programs
- Parks and Recreation Facilities
- Public Employee Salaries
- State Police
While nobody enjoys paying taxes, each business in the U.S. must comply and contribute to the tax pool. In order to ensure that your business pays its taxes timely and accurately, call the professionals of Don R. Walker, C.P.A. to help. Our experts can help with:
- Quarterly and Annual Tax Preparation
- Business Registration
- Tax Amendments
- Past Tax Year Filing
- Tax Form Review
- Assistance With IRS Regulations and Guidelines
When your business needs payroll tax preparation assistance that can be relied on, there’s only one team to call. The Don R. Walker, C.P.A. professionals have years of experience in tax law and scheduling so you can rest assured that your company’s taxes are completed efficiently, accurately, and timely for stress-free compliance. We provide tax services throughout the Fort Worth, TX area to deliver stress-free payroll tax completion for your business that’s correct, complete, and on time so you never have to worry about fines or other consequences. When you need payroll tax preparation for your business in Fort Worth, TX, call 817-905-1040 to reach our experts today.