If you are self-employed and hire employees to help you in your business, you have just entered the world of federal payroll tax reporting. Here's an overview of your responsibilities to the Internal Revenue Service (IRS) and the Social Security Administration (SSA).
Form W-4. This form should be completed by each employee and submitted to you prior to the issuing of an employee's first paycheck. Form W-4 is required because it provides you with the information you need to properly calculate federal income tax withholdings for the employee. The employee can also use this form to provide you with his/her complete name, address and social security number, which you will need for both paychecks and the W-2's you'll prepare at the end of the year.
Paychecks. You must be issue paychecks to your employees on a regular basis. These paychecks should include a paystub that reports the payroll withholding and payroll tax amounts for the current paycheck as well as year-to-date.
Payroll tax payments. It is your responsibility to forward all payroll withholdings and payroll taxes to the appropriate government agencies. Federal payroll tax payments include federal income tax withholdings as well as Social Security and Medicare taxes (both employee withholdings and the employer portion). The frequency of these payments depends on the amount of taxes you have withheld and/or are liable for. Many small businesses fall into the monthly or quarterly payment frequency category, but be sure to check IRS Publication 15 for details.
You must make your federal payroll tax payments electronically via the IRS program known as EFTPS (Electronic Federal Tax Payment System). So you should contact the IRS immediately to enroll in this program and to learn how to authorize payments directly from your bank account to the U.S. Treasury Department. You can make these payments by phone or via the Internet.
Payroll tax returns. You must file Form 941 every calendar quarter to report the federal income tax withholdings as well as Social Security and Medicare taxes. It is due by the end of the month following the end of quarter (i.e. due dates are April 30, July 31, October 31 and January 31). You must also file Form 940 annually by January 31 to report federal unemployment tax. The federal unemployment tax must be calculated each quarter but is only payable when the year-to-date accumulated liability reaches $500. If you don't reach the $500 threshold during the year, you can make one payment for the entire year with Form 940.
W-2's. At the end of the year you must prepare Form W-2 and give it to your employees by January 31. In addition, you must send a copy of Form W-2, along with a summary report known as Form W-3, to the Social Security Administration by February 28.
Failure to comply with any of these payroll responsibilities will result in stiff penalties. Be sure you understand your obligations, and by all means, obtain professional assistance from a competent tax professional rather than trying to do this yourself.
Like what you've read? ...Republish it and share great business tips!
Attention: Readers, Publishers, Editors, Bloggers, Media, Webmasters and more...
We believe great content should be read and passed around. After all, knowledge IS power. And good business can become great with the right information at their fingertips. If you'd like to share any of the insightful articles on BusinessManagementDaily.com, you may republish or syndicate it without charge.
The only thing we ask is that you keep the article exactly as it was written and formatted. You also need to include an attribution statement and link to the article.
" This information is proudly provided by Business Management Daily.com: http://www.businessmanagementdaily.com/31909/what-must-you-do-if-you-hire-employees "
- Summer Tax Savings - How to Properly Document Your Non-Cash Charitable Contributions
- How The New 2011 Social Security Tax Cut Affects Employees, Employers, And The Self-Employed
- How to Keep the IRS Off Your Back and Out of Your Life in 2011
- How to Increase Your Year-End Tax Deductions by Helping Others Over the Holidays
- I Forgot to Send Out 1099's by January 31 - What Do I Do Now?