What Are Payroll Taxes
Any tax levied by a government agency on employees’ wages, tips, and other compensation. The amounts withheld by employers from employees’ pay for federal income, social security, and Medicare taxes are considered trust fund taxes. They are referred to as trust fund taxes because the money is held in a special trust fund for the U.S. government. Amounts withheld for state and local income taxes are held in trust for the state or local government.
What Are Your Responsibilities?
Reporting and depositing payroll taxes to the appropriate agency in an accurate and timely manner is vital to your business. Late or inaccurate deposits may result in penalties and interest charges. These complex payroll tax requirements may seem intimidating but by learning a few simple concepts, you will be able to understand your payroll responsibilities and choose the best method for meeting them.
Hiring Your First Employee
As your business becomes more successful, you may need to consider hiring one or more employees and taking on the responsibilities of payroll tax withholding and reporting. Hiring an employee is fairly straightforward. However, if you are unfamiliar with the payroll process and applicable laws, you may find yourself subject to significant monetary penalties. As soon as you have hired a new employee there are several forms that need to be filed with the federal and, in many cases, state governments. Each new employee must complete a W-4 form. The information on the W-4 form is the basis for calculating the amount of withholding for that employee. You must keep the W-4 form on file for each active employee and retain these documents for four years after an employee is terminated.
For Employers
For Employees
