Items you will need
- I-9 forms
- W-4 federal forms
- state withholding forms
- state unemployment forms
- payroll program (optional)
- federal and state payroll reporting forms
When an employer hires an employee, employee tax is paid from the employer's own funds. If an employer does not pay required employee tax, files incorrectly, or makes late payments, he or she will most likely be subject to hefty fines and penalties.
Employee tax payments are complicated and confusing, so get professional accounting help when it is needed and follow these guidelines to avoid common mistakes.
Cross match each employee’s current ID with his or her current address, and note an explanation for differences. Have each employee fill out an I-9 form for identification and federal and state W-4 withholding forms.
Determine what employee taxes must be paid for each employee. This will vary by employee and by state. Generally, employers must withhold and pay federal, state, and sometimes local income taxes, in addition to Social Security, Medicare, and unemployment taxes on wages paid to an employee.
Use a good accounting payroll program to make paying employee taxes easier and to automatically file necessary federal and state reports and make payments online.
You can also file reports and make payments directly using government websites, but using good accounting payroll program reduces the margin of error.
Without the help of a comprehensive accounting payroll program, it is easy to overlook a required payment or form. So, if you do calculate and file employee taxes without one, take time to carefully review the federal, state and local government websites that relate to taxes. Forms and filing guidelines are regularly updated, so stay current to avoid mistakes and penalties.
Set up an individual employee file for each employee to document the employee tax paid and how the amount of tax withheld from the employee's wages was calculated. Use hard copy manila file folders or scan documents into a digital file.
In each file, include the employee's I-9 form, federal W-4 and state employee withholding forms plus additional documentation for wage garnishments, child support, and so on. Every time you pay an employee, photocopy the check (or direct deposit receipt) and put a copy of the paycheck stub in the employee's file.
Choose the method you want to use to pay employee tax.
Employee taxes can usually be paid by check or online. You must pay federal and many state payroll taxes by electronic funds transfer or by deposit with a bank if the dollar amount exceeds a certain limit.
Make a list of all the federal, state and local reports employers are required to file and when they are due.
Most employee taxes require electronic quarterly and annual reporting. Most employers must file quarterly 941 forms to show employee and employer withholding, Medicare and Social Security taxes.
In addition to the annual federal unemployment tax report, most states require quarterly and annual unemployment tax reports. At the end of the year, employers must also provide each employee an annual report on form W-2 of wages paid and federal, state and local taxes withheld.
Pay federal and state employee tax and file the forms on time, because failure to pay can result in accumulated interest and penalties. Employer penalties for unpaid federal income tax withholding and Social Security tax can be especially severe.
There are federal, state and local employee tax laws that apply only to specific situations and can require additional forms, reports and payments.
For information about federal employee tax laws, please see the IRS website.
For information on state payroll tax requirements, contact your state's taxation department and/or department of labor or equivalents. Most states have also created websites with online information, but the details of such information vary from state to state.
If you don't understand how to fill out an employee tax form or make a payment, get professional help.
This advice is not intended to replace advice of a licensed attorney and is not intended to be used, and it cannot be used by any taxpayer, to avoid payment of taxes or penalties that may be imposed on the taxpayer.
If you do decide to calculate employee tax manually, thoroughly research federal, state and local websites to get correct and updated forms and formulas necessary to calculate and submit employee tax payments. These can change from year to year, so keep current.
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