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Business taxes: Taxes for your employees
- Employee income taxes
As an employer, you are obligated to withhold federal income taxes
from employee wages and pay these to the IRS. How much you withhold
depends on your payroll frequency, size of the wage payments,
number of exemptions claimed by each employee and their marital
status. You must issue each employee a W-4
form for determining withholding exemptions.
- Social Security, Medicare
These taxes must be withheld from employee pay. The current
rates are 6.2 percent for Social Security and 1.45 percent for
Medicare. As an employer, you pay a matching amount -- for totals
of 12.4 percent and 2.9 percent.
- Unemployment tax
Most employers pay both federal and state unemployment tax under
the Federal Unemployment Tax Act. The tax is due on the last day
of the first month after each quarter ends, and can be paid by
the electronic transfer of money or in an authorized financial
institution using Form 8109, Federal Tax Deposit Coupon.
Forwarding the taxes
Withholding taxes are paid monthly or semiweekly, depending on the
individual circumstances of the business. Large businesses are generally
required to pay their tax within a day of each payroll. Details
on your tax liabilities can be found in the IRS Tax Guide for Small
Business and in The Employer's Tax Guide.
State taxes
You also may be required to withhold and forward state income taxes
and other local taxes charged to employees, employers and businesses.
Additional taxes and fees may be levied against firms in specific
industries.
State and local taxes are beyond the scope of this
article, so consult your individual tax adviser.
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