What Are the Taxes Employers Pay and What Income Tax Do Employers Have to File?
If you are an employer, you need to know what taxes you pay and what you have to file. The Federal Insurance Contributions Act (FICA) is the main source of your federal income tax, but you may also have to withhold and file state and local taxes. In addition, you may need to pay social security and Medicare taxes.
Employers are required to withhold and file these taxes on a monthly, quarterly, or annual basis. When it comes to state and local payroll taxes, the rate can vary from state to state. It is also important to note that some states do not require employers to withhold state or local taxes. You can find out if you are required to withhold these taxes by checking with the appropriate workforce agency in your area. BZ Beez Tax & Insurance Services
Some of the more common taxes employers pay and have to file include Social Security and Medicare taxes. These are a percentage of each employee’s gross wages. Most states collect income tax, and the rate is based on a combination of personal exemptions and filing status. A business owner should also know that there are several voluntary deductions that can reduce their employees’ taxable wages.
One of the first things employers need to do is figure out how much FICA they are going to withhold from their employees’ earnings. Employees provide information about their withholdings on Form W-4. This is the form that determines whether they are subject to federal or state tax. Once the deductions have been calculated, an employer can pay their share of the tax using their own money or pre-tax dollars.
The IRS publishes publications that help you with these calculations. They describe the different types of benefits that are pre-tax for various purposes, and explain how you can use voluntary deductions to reduce the taxable wages.
Employers also have to withhold and file federal unemployment taxes. You must do this if you have at least one employee working on a day of the week during 20 weeks of the calendar year. However, you can temporarily suspend these taxes if you want to take advantage of President Trump’s COVID-19 relief.
The IRS has announced a crackdown on employers who do not collect enough payroll taxes. In order to qualify, an employer must pay at least 0.9% of all wages earned over $200,000, and they must withhold a total of 6% for unemployment insurance. For additional information, you can check out the IRS’s website or consult a professional.
Employers also have to withhold federal and state income taxes on bonuses, commissions, and other non-cash payments. Your employees will provide information about their earnings and allowances on the Form W-4, and you can calculate withholding amounts using this information.
Many employers will also need to withhold additional Medicare taxes on certain employees. This tax applies to employees who earn over $250,000 per year. You must withhold this tax starting in the month after an employee is hired. The tax is 2.9%. Additionally, this tax applies to all employees, regardless of marital status.