The following are wage withholdings and taxes that small business owners must keep in mind:
Withhold federal income tax from employee’s wages.
Withhold part of each employee’s Social Security and Medicare taxes and you pay a matching amount yourself.
As of January 1, 2013, employers are also responsible for an Additional Medicare Tax on employee’s wages.
Federal Unemployment (FUTA) Tax
Withheld wages for Social Security and Medicare taxes can be deposited electronically, by mail, or through delivery of check or money order to a federally authorized tax-depository financial institution. It is possible to request an extension for your federal tax returns from the IRS. However, even if you’ve requested a filing extension, you still need to deposit your tax payments on tax day (April 15th). The extension grants additional time for your business to gather information to accurately report the business’s tax return.
As a business owner, you’ll need to complete a Form W-2 for each employee after the end of the calendar year and give the employee their copy no later than January 31. You’ll have to send a copy of the W-2 to the Social Security Administration, the IRS, and any local and state governments that require it. You can summarize the W-2 with a Form W-3. The W-2 Wage and Tax Statement form is used to report wages, tips and other compensation paid to employees, along with withheld taxes and any tax credits.
As an employer, you can receive tax credits on wages for hiring certain employees (ex: American Indians). Check with the IRS website to see if you qualify for these tax credits.
For more information about business taxes, go to www.irs.gov.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
