Taxes, when you have employees
Once you have at least one person working for your business, you’re an employer. Being an employer comes with a wide range of responsibilities, including withholding, depositing and paying employment taxes. How can you make sure you’re fulfilling all your tax duties to avoid getting hit with fines and fees?
First, make sure to mark your calendar with key dates. The IRS has an Employment Tax Due Dates page with information on what you need to do and when you need to do it. Notably, you have to file returns four times a year, and at the end of the year, prepare and file Form W-2, Wage and Tax Statement, to report wages, tips and other compensation paid to employees. Each employee needs a copy. You will use Form W-3, Transmittal of Wage and Tax Statements to transmit Form W-2 to the Social Security Administration.
Employers generally must withhold income tax from employees’ wages. To figure out how much tax to withhold, you will need to use the employee’s Form W-4, the appropriate method and the appropriate withholding table described in Publication 15-T, Federal Income Tax Withholding Methods. You must then deposit your withholdings. The requirements for depositing vary based on your business and the amount you withhold.
Other key responsibilities
Employers also have to withhold Social Security and Medicare taxes from employees’ wages and make sure they submit the matching amounts. (Something else to budget for!) To figure out how much tax to withhold, use the employee’s Form W-4 and the methods described in Publication 15, Employer’s Tax Guide and Publication 15-A, Employer’s Supplemental Tax Guide. You must deposit the taxes you withhold. You can find the detailed requirements for depositing on the IRS.gov website.
The employee tax rate for Social Security is 6.2%. Employers are also responsible for withholding the 0.9% Additional Medicare Tax from an employee’s wages and compensation that exceeds a threshold amount based on the employee’s filing status. You are required to begin withholding the Additional Medicare Tax in the pay period in which you pay wages and compensation in excess of the threshold amount to an employee. There is no employer match for the Additional Medicare Tax.
Federal Unemployment Tax Act
Employers report and pay Federal Unemployment Tax Act (FUTA) tax separately from federal income tax and Social Security and Medicare taxes. You pay FUTA tax only from your own funds. Employees don’t pay this tax or have it withheld from their pay. Again, refer to Publication 15 and Publication 15-A for more information on FUTA tax.
This is just the beginning of an employer’s responsibilities. You are likely subject to state withholding rules as well. It’s essential that employers be on top of the general rules and any annual rate changes. Understanding these tax issues is important, since you bear the responsibility of fulfilling your tax obligations related to your employees. It’s important to send out payments on time to avoid penalties and late fees. Be sure to work closely with financial professionals to make sure you stay compliant.
Copyright 2024
Why Atlantic Payroll Partners
The biggest payroll companies probably won’t have time for your business. It’s that simple, you’ll be a number. At Atlantic Payroll Partners, you’ll be the opposite. We’ll know more than your name; we’ll know the names of your children and their birthday’s as well. We will know you.
We’ve been helping Florida business by managing their payroll and providing workers' compensation quotes for ten years. We help keep payroll cost affordable by provided transparent PEO payroll quotes that allow you to plan your budget accordingly. Like the big payroll companies, you can manage your payroll and payroll timekeeping with us, while reaping the benefits of PEO risk management.
Thinking about payroll outsourcing can be scary. Make sure you know what to expect from payroll outsourcing providers; to make the best decision for your business. In addition to offering payroll, and workers' comp quote we offer: Human Resource consultations, Accounting services, and benefits such as, 401ks and Healthcare plans.
Reporting and Depositing Employee Taxes
If you have employees, you must deposit all the federal income tax you withhold from your employees (based on their Form W-4 ), including both the employer and employee portions of Social Security and Medicare taxes, known collectively as FICA. So how does it work? How do you go about reporting and depositing employee taxes?
Form 941
Based on your situation, you may have to make deposits on a monthly or a semiweekly schedule — and deciding which one is right for your business involves calculations:
If you’re a Form 941 filer (quarterly), your deposit schedule for a calendar year is determined from the total taxes reported on your Form 941s during a set look-back period. Did you report $50,000 or less of taxes, you’re a monthly schedule depositor; if you reported more than $50,000, you’re a semiweekly schedule depositor. Companies that use annual Form 944 or Form 945 have similar look-back rules but on an annual basis.
You have a separate process for your annual federal unemployment tax, which requires Form 940. With a few exceptions, if you answer “yes” to either one of these questions, you must file Form 940:
- Did you pay wages of $1,500 or more?
- Did you have one or more employees for at least some part of a day in any 20 or more different weeks? Count all full-time, part-time and temporary employees (but not partners if your business is a partnership).
Most employees know that they have to prepare a Form W-2 for each employee, but there are also subtleties there. According to the IRS, employers who pay remuneration, including noncash payments of $600 or more for the year for services performed by an employee, must file a Form W-2 for each employee for whom:
- Income, Social Security or Medicare tax was withheld.
- Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding on Form W-4, Employee’s Withholding Certificate.
Form W-3
Less well known is the accompanying Form W-3, Transmittal of Wage and Tax Statements. Anyone required to file Form W-2 must file Form W-3 to transmit Copy A of Form W-2.
Finally, after you’re all set with your amounts, you cannot just write a check. You must use the electronic federal tax payment system (or EFTPS) to make all federal tax deposits.
This is just a summary of the involved and always-changing process of payroll tax submissions. Systems and the specific amounts referenced can change, so be sure to keep in touch with professionals to make sure you’re following the correct and current rules and procedures.
Did you skip to the bottom?
Seems like a lot to keep up with in addition to running your business. That’s because it is, good news is WE CAN DO IT FOR YOU. At Atlantic Payroll Partners can handle your payroll. Not just allowing you to keep track of employees hours and wages but all of your payroll. We take care of the burden tax reporting and deposits for you. New policy or regulation, don’t worry about it; with our payroll solution we keep up with new policies. Interest in pricing for payroll, get a quote.
Copyright 2024
Why Atlantic Payroll Partners
The biggest payroll companies probably won’t have time for your business. It’s that simple, you’ll be a number. At Atlantic Payroll Partners, you’ll be the opposite. We’ll know more than your name; we’ll know the names of your children and their birthday’s as well. We will know you.
We’ve been helping Florida business by managing their payroll and providing workers' compensation quotes for ten years. We help keep payroll cost affordable by provided transparent PEO payroll quotes that allow you to plan your budget accordingly. Like the big payroll companies, you can manage your payroll and payroll timekeeping with us, while reaping the benefits of PEO risk management.
Thinking about payroll outsourcing can be scary. Make sure you know what to expect from payroll outsourcing providers; to make the best decision for your business. In addition to offering payroll, and workers' comp quote we offer: Human Resource consultations, Accounting services, and benefits such as, 401ks and Healthcare plans.
How much are the payroll taxes in Florida?
Florida is a popular destination for retirees not only because of the great weather but also because of the absence of state income tax.
Just because Florida doesn’t have state income tax doesn’t mean that you don’t have to worry about other types of taxes. As one of the 2.3 million Americans who own a small business in Florida, you are responsible for payroll taxes.
While it’s similar to the process for other states, you may find the process in Florida easier and more streamlined. For example, the laws about overtime and leave are not as restrictive as what you would find in other states. You can take advantage of the Paid Time Off (PTO) laws that require that employees use their time off within the year they accrued it. It’s the use-it-or-lose-it policy, which is beneficial to you as an employer for a variety of reasons.
How much are the payroll taxes in Florida?
Payroll taxes include Medicare tax, with a tax rate of 1.45% on all earnings and Social Security tax, with a rate of 6.2% on the first $147,000 as of 2022. You’re also responsible for paying state and federal unemployment taxes.
- You’re required to pay a reemployment rate of 2.7% if you’re a new employer. That rate applies to $7,000 on an annual basis for every employee. Earnings above the $7,000 are not taxable under Florida payroll taxes.
- If you’re a new owner taking over a business, you can use the tax rate from the previous owner but you’re also liable then for any outstanding amounts that might be due.
- If you’ve been in business for more than 10 quarters, the tax rate can range from 0.10% to 5.4% per employee.
The maximum rate is 5.4%, but it can also be used as a penalty for late or delinquent payments of more than a year. An auditor can also assign the 5.4% if requests are not fully met and complied with. If you are assigned a high tax rate, you can appeal it if you file the appropriate paperwork, within 20 days.
Why is compliance so important?
It’s essential that you comply with requests for information and records, but it’s also important to stay on top of payment schedules and any other documentation requirements.
- Report new hires (and rehires).
- Verify weekly earnings.
- Report separations.
To avoid penalties and higher tax rates, it’s important to stay on top of all compliance documentation and payments, but it’s easy to overlook or miss the deadlines. That’s why so many companies are now turning to payroll services. The fact that they don’t have to worry about incorrectly filed documents or missed deadlines are just one small part of why payroll services really do save companies time and money.
Gone are: the frustration, the confusion, the guesswork, and indecision. Atlantic Payroll Partners offer the best payroll services to meet your needs. We can pick up where you left off and make it a streamlined, effective, accurate, and secure payroll solution that just runs like clockwork. You won’t ever have to worry about payroll taxes again.
Updated January 2022
Copyright 2024
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Get to know Atlantic Payroll Partners
At Atlantic Payroll Partners we believe we are the best, local payroll provider to help you grow your business. Even more than that. We’re a Professional Employment Organization that offers an incredible suite of solutions for your business. In addition to offering payroll services we offer,
Our solution suite is back by over 100 years of combined experience in the PEO space.
We’re proud to say that we’ve helped businesses reduce employee turnover, increase revenue, make more money, and lighten their daily load by working with us. Our clients can offer their employees’ health care benefits, and access to the same 401k plans that the Fortune 500 companies use without breaking the bank.
We welcome you to continue exploring our website, to learn more about Atlantic Payroll Partners and how we can help improve your business.
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