Employment Taxes ? What Are They?

If you have employees, you are responsible for paying a variety of taxes at the federal, state, and local levels. You must also withhold certain taxes from the paychecks of your employees. So, what are employment taxes?

Employment taxes include the following.

1. Federal income tax withholding

2. Social Security and Medicare taxes

3. Federal unemployment tax (FUTA).

Federal Income Taxes/Social Security and Medicare Taxes

You generally must withhold federal income tax from wages paid to an employee. Form W-4 is used to determine the specific amount, although most payroll services or your accountant will do this for you.

Social security and Medicare taxes pay for benefits that workers and families receive under the Federal Insurance Contributions Act (FICA). Social security tax pays for benefits for the retired, survivors, and disability insurance distribution provisions of FICA. Medicare tax pays for benefits under the medical care provisions of FICA. As an employer, you must withhold a percentage of these taxes from employee and match the withholding amount.

In general, you must deposit these taxes by check or cash to an authorized financial institution, typically your bank. Check with your tax professional to make sure you are not required to use the Electronic Federal Tax Deposit System (EFTPS). Regardless of the payment method, you will then report them on Form 941, the Employer's Quarterly Federal Tax Return

Federal Unemployment Tax (FUTA)

FUTA is a combined federal and state program that provides unemployment compensation to the unemployed. As a business owner, you are solely responsible for paying this tax, to wit, nothing is withheld from the paychecks of your employees. FUTA is determined by using Form 940, but you are encouraged to use a tax professional to determine payment amounts.

Employment taxes can be frustrating for a small business owner. They are, unfortunately, a necessary evil as your business grows.

Richard Chapo is CEO of http://www.businesstaxrecovery.com - Obtaining tax refunds for small businesses by finding overlooked tax deductions and credits through a free tax return review.

---

Donating Cars To Charity - New Tax Rules

On June 3, 2005, the IRS released guidance on charitable... Read More

The Seven Deadly Tax Sins: Commonly Missed Deductions

It's that time again, the April 15 tax deadline is... Read More

10 Tax Tips to Reduce Costs and Increase Income

No one likes paying tax. Everyone understands that tax is... Read More

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain... Read More

Tax Tips - Which Tax Form Is Right For Me?

IRS Tax forms can be confusing.Am I a 1099 or... Read More

Alas! In E-Commerce Taxland

In trying to comply with tax laws for your e-business,... Read More

Highlights of IRS List of 2005 Tax Scams

Each year, the IRS lists various scams taxpayers get caught... Read More

Corporations Failing To Claim AMT Exemption Overpay Taxes By $11,000

Does your incorporated business pay alternative minimum tax ["AMT]? If... Read More

Furnishing Evidence in E-Tax Compliance

Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This... Read More

Tax Reform, My Way

We need real tax reform and we need it now.... Read More

How Likely Are You To Be Audited?

Statistics for IndividualsUnfortunately, the IRS increased its rate of auditing... Read More

How Home-Based Businesses Can Avoid Giving Uncle Sam More than His Share

How Home-Based Businesses Can Avoid Giving Uncle Sam... Read More

How to Check the Status of Your Tax Refund Online

So, you were pleasantly surprised to learn that you are... Read More

Early Distributions From Retirement Plans

An early distribution from an Individual Retirement Arrangement (IRA) or... Read More

Business Tax Deductions

As we enter mid-March, taxpayers begin to become very interested... Read More

Identity Theft ? Impacting Your Taxes?

If your identity is stolen, your finances can quickly become... Read More

Slash Tax when Buying a Business

When buying a business, how the "purchase price" is made... Read More

2005 Ford Escape Hybrid Certified For Clean-Fuel Deduction

If you are environmentally conscious and purchase a 2005 Ford... Read More

Getting A Second Extension to File 2004 Taxes

Millions of people file tax return extensions every year. The... Read More

Small Businesses Filing Amended Federal Tax Returns to Recover Money

Small Businesses Filing Amended Federal Tax Returns to... Read More

Tax Strategy - Let Washington Pay for Your Corvette, Porsche, or Air Plane

Deducting Your Auto ExpensesAuto deductions are a very complex topic.... Read More

Save Money on Taxes - Is the Only Way to Get Your Tax Savings is to Sleep With an IRS Agent?

Tilting the Tax Laws in Your Favor.In order to accelerate... Read More

Reducing Taxes Through Dividend-Salary Mix Calculations

Should I take wages or dividends from my privately owned... Read More

What is a Federal Tax Lien?

A Federal Tax Lien (FTL) is a legal instrument that... Read More

Need an Offshore Sales Office in a Tax Free Environment?

The 100 year old investment-banking firm of... Read More

Are You An Innocent Victim of These Popular Myths?

Misconceptions, misinterpretations and just plain "untruths" are floating about income... Read More

Marriage or Divorce ? Check Your Social Security Number

Newlyweds and the recently divorced should make sure that names... Read More

Estate Taxes - It Pays to Plan Ahead

Estate taxes. It's not enough to simply know they exist,... Read More

Deducting Points On Home Refinances

Deduction of Refinance PointsAny points that you pay in the... Read More

Tax Help Secret: Avoiding the Entreprenuers Curse

Your days as an entrepreneur and businessperson are consumed with... Read More

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the... Read More

Tax Trap #4 -- The Quagmire of Depreciation

If you are a Small Business Owner or Self-Employed Person,... Read More

SFR Substitute for Returns: IRS Action on Non-Filers

In the latest Star Wars episode, the evil empire executes... Read More