QuickBooks helps you by calculating them for you. But you should understand something about your payroll tax obligations before you even begin the setup process.
If you’re already processing your company’s payroll manually or through QuickBooks, you know all too well how detail-heavy this task is, and how precise you must be. Maybe you even took a QuickBooks training course to learn about it before you started.
If you’re a new business and/or you’re hiring your first employee, you should have a solid understanding of payroll tax requirements. You’ll be working extensively with the IRS and other taxing agencies, and you could be subject to fines and penalties — or worse — if you’re lax at this critical obligation.
Among the many documents you’ll have to fill out when you hire new employees is the W-4. This simple forms asks for basic information from each individual, like marital status and the number of allowances (tax withholding, calculated by the employee) he or she will be claiming. The latter can be changed at any time by the employee.
The 2013 IRS Form W-4
As the employer, you will submit the taxes that you withhold from your employees’ gross pay to the correct agencies on a monthly or quarterly basis. In some cases, you’ll be required to submit matching contributions of your own.
Here’s what you will be deducting from employee paychecks:
Federal Income Tax
Everyone knows what this is: the money needed by the U.S. government for its operations and services to the people. The amount you deduct — and which QuickBooks calculates — will be based on the number of allowances claimed on the W-4. The more allowances, the less money is taken out.
State Income Tax
Like the federal government, the states need money to run, too, though not all states assess an income tax on their citizens. If yours does, you’ll need to find out whether you can use the IRS W-4. Your state may have its own form.
Social Security and Medicare
Also known as FICA Taxes, this withholding is done to fund the workforce’s Social Security and Medicare needs. Unlike federal and state taxes, you as the employer share this responsibility with your employees. You each must pay the percentage of wages that is established by Congress. There’s an annual maximum for Social Security, but not for Medicare. Your portion must be submitted at the same time you send in your staff’s contributions.
QuickBooks helps you track and submit your payroll taxes.
Federal and State Unemployment Taxes
This is where the money comes from that provides unemployment checks for individuals who have lost their jobs. Employees do not have to pay this tax; only you as the employer are responsible. Some states require an additional state unemployment tax.
Employees who are injured on the job or who have become ill because of workplace conditions are entitled to payments. Each state has its own laws where workers’ compensation is concerned. Only employers must submit this tax, not employees.
These explanations relate to the most common situations. As per usual with taxes, there are exceptions. QuickBooks, your accounting professional and the taxing agencies themselves can help you with your payroll taxes, as could a good QuickBooks training course.