Payroll Taxes and Employer Responsibilities
As an employer, understanding the obligations associated with running payroll can be a little daunting. In this post we will explain what taxes you are responsible for, the returns that need to be filed as well as the associated deadlines.
What are taxes am I responsible for? An employer’s federal payroll tax responsibilities include withholding income taxes from an employee’s compensation and paying their Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA). FICA is comprised of the following taxes:
- 6.2 percent Social Security tax;
- 1.45 percent Medicare tax (the “regular” Medicare tax); and
- Since 2013, a 0.9 percent Medicare surtax when the employee earns over $200,000.
You must withhold these amounts from an employee’s wages. The law also requires you to pay the employer’s portion of two of these taxes:
- 6.2 percent Social Security tax
- 1.45 percent Medicare tax (the “regular” Medicare tax).
What other things am I responsible for? The following checklist list provides a brief summary of your basic responsibilities. Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ.
- Verify work eligibility of new employees
- Record employees’ names and SSNs from social security cards
- Ask employees for Form W-4
- Withhold federal income tax based on each employee’s Form W-4
- Withhold employee’s share of social security and Medicare taxes
- Withheld income tax
- Withheld and employer social security taxes
- Withheld and employer Medicare taxes
Note: Due date of deposit generally depends on your deposit schedule (monthly or semiweekly). For more information on deposit schedules, see the following blog post.
Quarterly (By April 30, July 31, October 31, File Form 940 and January 31):
- Deposit FUTA tax if undeposited amount is over $500
- File Form 941 (pay tax with return if not required to deposit)
Annually (see below for due dates):
- File Form 940
- File Form 944 if required (pay tax with return if not required to deposit)
- Reconcile Forms 941 (or Form 944) with Forms W-2 and W-3
- Furnish each employee a Form W-2
- File Copy A of Forms W-2 and the transmittal Form W-3 with the SSA
- Furnish each other payee a Form 1099 (for example, Form 1099-MISC)
- File Forms 1099 and the transmittal Form 1096
- File Form 945 for any nonpayroll income tax withholding
- Remind employees to submit a new Form W-4 if they need to change their withholding
- Ask for a new Form W-4 from employees claiming exemption from income tax withholding
What are the due dates? The following calendar will tell you what items are due to be filed and their associated deadlines.
By January 31
File Form 941 or Form 944. File Form 941 for the fourth quarter of the previous calendar year and deposit any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the quarter is less than $2,500. File Form 944 for the previous calendar year instead of Form 941 if the IRS has notified you in writing to file Form 944 and pay any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 944 if your total tax liability for the year is less than $2,500.
File Form 940. File Form 940 to report any FUTA tax.
Furnish Forms 1099 and W-2. Furnish each employee a completed Form W-2. Furnish Form 1099-MISC to payees for nonemployee compensation.
File Form W-2. File with the SSA Copy A of all paper and electronic Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements. For more information on reporting Form W-2 information to the SSA electronically, visit the SSA’s Employer W-2 Filing Instructions & Information webpage. If filing electronically, via the SSA’s Form W-2 Online service, the SSA will generate Form W-3 data from the electronic submission of Form(s) W-2.
File Form 1099-MISC reporting nonemployee compensation. File with the IRS Copy A of all paper and electronic Forms 1099-MISC that report nonemployee compensation, with Form 1096, Annual Summary and Transmittal of U.S. Information Returns.
File Form 945. File Form 945 to report any nonpayroll federal income tax withheld.
By February 28
Request a new Form W-4 from exempt employees. Ask for a new Form W-4 from each employee who claimed exemption from income tax withholding last year.
File paper Forms 1099 and 1096. File Copy A of all paper Forms 1099, except Forms 1099-MISC reporting nonemployee compensation, with Form 1096 with the IRS.
File paper Form 8027. File paper Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, with the IRS.
On March 1
Forms W-4 claiming exemption from withholding expire. Any Form W-4 claiming exemption from withholding for the previous year has now expired. Begin withholding for any employee who previously claimed exemption from withholding but hasn’t given you a new Form W-4 for the current year. If the employee doesn’t give you a new Form W-4, withhold tax based on the last valid Form W-4 you have for the employee that doesn’t claim exemption from withholding or, if one doesn’t exist, as if he or she is single with zero withholding allowances. If the employee gives you a new Form W-4 claiming exemption from withholding after February 28, you may apply the exemption to future wages, but don’t refund taxes withheld while the exempt status wasn’t in place.
By March 31
File electronic Forms 1099 and 8027. File electronic Forms 1099, except Forms 1099-MISC reporting nonemployee compensation, and 8027 with the IRS.
By April 30, July 31, October 31, and January 31
Deposit FUTA taxes. Deposit FUTA tax for the quarter (including any amount carried over from other quarters) if over $500. If $500 or less, carry it over to the next quarter.
File Form 941. File Form 941 and deposit any undeposited income, social security, and Medicare taxes. You may pay these taxes with Form 941 if your total tax liability for the quarter is less than $2,500. Don’t file Form 941 for these quarters if you have been notified to file Form 944 and you didn’t request and receive written notice from the IRS to file quarterly Forms 941.
Before December 1
New Forms W-4. Remind employees to submit a new Form W-4 if their marital status or withholding allowances have changed or will change for the next year.