Employment Taxes for Employers and Self Employed Individuals
When a new client comes into our offices one thing we stress (ok…read the riot act) that withholding needs to be done for wages paid. Whether you are an employer or self-employed, you are responsible for paying federal, state and local taxes. As an employer with employees, you must withhold certain taxes from your employees' paychecks.
Employment taxes include income taxes, Social Security and Medicare taxes, and the federal unemployment tax (FUTA).
If you are self-employed, you are responsible for paying a self-employment tax that is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.
Some clients prefer to perform all the required withholdings, tax deposits and filing of tax returns themselves. Though I don’t have personal experience with Intuits payroll services I have had several clients use this service with good results. There are several nationally franchised payroll services such as ADP or Paychex which can be extremely helpful. There are also local services and accountants which provide this service. A service we have done a lot of work with locally is Primpay.
Below are several links to the IRS website reviewing withholding requirements. You may notice that it can be complicated. Additionally, there are numerous costly penalties when the rules are not followed.
All states have their own rules. For limited list of state tax requirements see State Tax Guide.
For Self-Employed Individuals
If you are self employed or an independent contractor you will be responsible for the employees and employers share of FICA and Medicare taxes. Many taxpayers are not aware of this when they start a business and are not prepared for an additional tax of approximately 15% of earned income. Please see Self Employment Tax and Self-Employed Individuals and Independent Contractors for more guidance.
· Please see Employment Taxes for Businesses which provides an overview of the federal taxes required for employers. This guide includes information on required forms (such as Form 941 and 944), filing requirements and deadlines, e-file options, and contact information for getting tax help.
· Please see W-4: Income Tax Withholding Q&A which
lists answers to frequently asked questions about Form W-4.
· Please see W-2: Social Security Taxes Filing Instructions & Information which outlines an employer's responsibilities for filing Social Security taxes.