Reporting Payroll Taxes

All employers must pay a payroll tax, either on their own after purchasing IRS-approved software, or with the help of a tax professional. Failing to fulfill this obligation can have significant repercussions, including the accrual of fines and fees, making it especially important for business owners to have a thorough grasp of their tax-related responsibilities.

What are Payroll Taxes?

Payroll taxes, which are also commonly referred to as employment taxes, are taxes paid on the wages and salaries of employees and are used to finance a variety of social insurance programs. These taxes are actually made up of a number of different taxes, including:

• Federal income taxes that are withheld from employee wages;
• Employer portions of Social Security and Medicare taxes;
• Employee portions of Social Security and Medicare taxes; and
• The Federal Unemployment Tax (FUTA), which most employers need to pay, but isn’t withheld from employee wages.

Some employers may also need to pay backup withholding taxes if they made payments to non-employees, who failed to provide the employer with the correct Taxpayer Identification Number (TIN). Employers are responsible for deducting the proper amount of payroll tax from the wages of their employees, calculating their share of taxes, depositing payments, and filing with the IRS on time.  Failing to fulfill any of these obligations can have serious consequences for business owners.

Electronic Filing

All of the returns used to report payroll taxes can either be filed on paper or electronically. Filing electronically, however, has become increasingly popular with business owners, approximately 60 percent of whom file online. By filing electronically business owners save time and are able to ensure that their returns are both secure and accurate. Often, the IRS acknowledges receipt of an electronically filed return within 24 hours. It’s also a lot easier to make a mistake on paper, as the software used for electronic filing often identifies mistakes immediately, a process that could take weeks or even months for those who file on paper. Business owners who do choose to file electronically can do so on their own, by purchasing the proper software, or with the help of a tax professional.

Paying Taxes Electronically

Although some employers, particularly those with small payrolls, choose to pay their taxes when they file their payroll tax return, most opt instead to make regular deposits with the Treasury Department. These deposits must be made via electronic funds transfer (EFT). The easiest way to do that is through the Electronic Federal Tax Payments System (EFTPS), either online or over the phone. Businesses can also use the system to pay other federal taxes, including quarterly estimated tax payments.

Do You Owe Payroll Taxes?

If you own a small business and have questions about your tax obligations, don’t hesitate to call Florida and IRS employment and payroll tax attorney, CPA, and former FBI Special Agent Ronald Cutler, P.A. to learn more about payroll and other employment taxes. You can set up a free, one-on-one consultation with a member of our legal team by calling 386-490-9949 today.

Sources:

irs.gov/taxtopics/tc307

irs.gov/businesses/small-businesses-self-employed/employment-taxes