{"id":16900,"date":"2019-08-27T08:00:04","date_gmt":"2019-08-27T13:00:04","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=16900"},"modified":"2019-10-15T09:25:45","modified_gmt":"2019-10-15T14:25:45","slug":"how-to-help-your-small-business-clients-stay-on-top-of-payroll-tax-obligations","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/tax-law-and-news\/how-to-help-your-small-business-clients-stay-on-top-of-payroll-tax-obligations\/","title":{"rendered":"How to Help Your Small Business Clients Stay on Top of Payroll Tax Obligations"},"content":{"rendered":"

Payroll taxes or employment taxes carry their own set of rules and filing requirements. Tax professionals can always take the opportunity to educate and help small business owners or self-employed clients so they stay on top of their filing responsibilities and avoid missing deadlines and incurring penalties. This article will run through the rules and filing deadlines associated with payroll taxes.<\/p>\n

Payroll taxes are paid by employers and employees through the payroll process. The employer withholds certain taxes from employee paychecks and remits these taxes, along with the employer portions, to the various taxing agencies. The employee\u2019s gross pay is reduced by any amounts withheld. Different rules apply for employees who receive tip income<\/a>.<\/p>\n

Federal Income Taxes<\/b><\/p>\n

Employers must withhold<\/a> and deposit federal income tax from an employee\u2019s wages to the IRS. The employer uses the employee\u2019s\u00a0Form W-4<\/a>, Employee\u2019s Withholding Allowance Certificate<\/i>, and the withholding tables in\u00a0Publication 15, (Circular E)<\/a>, Employer’s Tax Guide<\/i>,\u00a0to figure out how much to withhold. Since they are not considered employees and don\u2019t receive W-2s, self-employed individuals make quarterly estimates to cover their expected federal tax liability.<\/p>\n

Social Security and Medicare Taxes: Federal Insurance Contributions Act (FICA)<\/b><\/p>\n

Employers are required to withhold Social Security and Medicare taxes from employee wages, match these amounts with employer contributions, and make deposits. The employee tax rate for the Social Security component is\u00a06.2 percent, and the wage limit is $132,900\u00a0for 2019. This wage cap is indexed to inflation and increases each year. The employee tax rate for the Medicare component is 1.45 percent, <\/b>and there is no cap on wages.<\/p>\n

Self-employed individuals are required to cover the employer and employee components. These amounts are calculated on the\u00a0Schedule SE<\/a>, Self-Employment Tax<\/i>, of the individual tax return. The business gets to deduct the employee\u2019s share (one-half of the total self-employment tax due) from its gross income.<\/p>\n

Additional Medicare Tax<\/b><\/p>\n

Employers are responsible for withholding a\u00a0.9 percent additional Medicare tax<\/a> on employee wages over a certain threshold amount based on the employee\u2019s filing status ($250,000 for married filing joint, $125,000 for married filing separate and $200,000 for other filers). The employer withholds this tax in the pay period when wages exceed the threshold until the end of the year. There is no employer match for this component. In determining when to withhold this tax, be sure not to take into account wages earned from other jobs or wages from a spouse; this can create over- and under-withholding situations.<\/p>\n

Federal Unemployment Tax (FUTA)<\/b><\/p>\n

Employers are required to report and pay FUTA tax separately from federal income tax and FICA taxes. Employers pay this tax from their own fund, and employees are not responsible for this tax. For 2019, the FUTA tax rate is\u00a06.0 percent and applies to the first $7,000 of wages\u00a0paid to each employee. You can take a credit against FUTA tax for amounts paid into state unemployment funds.<\/p>\n

State Payroll Taxes<\/b><\/p>\n

State payroll taxes include state income tax withholding for the states that impose a tax, which is based on where the employee works. In addition, some states require payroll taxes to cover state unemployment tax funds, state disability funds (California, for example) and state worker\u2019s compensation funds.<\/p>\n

Forms to File and Due Dates<\/b><\/p>\n