The bigger your business becomes, the more complicated your tax matters become. Many new business owners don't know all the taxes they need to keep track of. They may understand that they need to file and pay Business Taxes, but often completely forget their requirements with Payroll Taxes. This page will help you to understand what Federal Payroll Taxes you must file and how to calculate tax due.
Payroll Taxes: Employment Taxes
Form 941:
You must withhold a certain amount from every paycheck you give your employees and provide a certain amount yourself to pay these quarterly employment Payroll Taxes. Every March, June, September, and December you must report the following information:
- The wages you paid and how much you withheld for Payroll Taxes.
- Your share and your employees' share of Social Security and Medicare taxes.
- Any tips your employees may have received.
- Any adjustments made to Social Security, Medicare, sick pay, tips, and life insurance.
- Credit for COBRA premium assistance payments for 941s from September 2008 to May 2010.
If you close your business, you still need to file your Payroll Taxes for that quarter. However, you will need to indicate that it is the final return. If you are selling or transferring your business, you need to file a 941 on your own and only report the amount of Payroll Taxes you paid. The new owner must file a final return for that quarter, as well.
Form 944:
If you know your total annual employment tax liability will be less than $1,000, you only file once a year and not quarterly on a Form 944. This IRS form is designed for smaller employers to cut down on paperwork.
For both employment tax forms, you can figure your Payroll Taxes by looking up your employees' filing status and number of exemptions in the Circular E tables. You need to match the amounts indicated for withholding on Social Security and Medicare.
Unemployment Taxes
Only Form 940s are used for these Payroll Taxes, and are filed on an annual basis. All businesses are liable for these Payroll Taxes if they paid more than $1,500 in wages or had employees for at least a part of a day for a minimum of 20 weeks during the year. The employee is not at all liable for this tax debt. The tax rate is calculated by computing 6.2% of the first $7,000 you paid each employee.
What to Do If You Made a Mistake
Payroll Taxes are much more complicated than income taxes, and it is very easy to make an error. You may receive a CP276B for a variety of reasons. Maybe you didn't pay enough or you didn't pay on time. If you get one of these notices, don't panic. Simply look over how you have been handling your Payroll Taxes. If you cannot see where you made a mistake, you may want to hire a IRS tax debt professional to help you.
For help with your Payroll Taxes, consult a professional. Call (800) 590-4524 now or fill out the form below for a free tax debt consultation on how to fix any problems you may have with Payroll Taxes! We'll only connect you with a tax debt relief company holding at least a B rating with the Better Business Bureau.
