| are a business owner, you must withhold taxes from | | | | amount of your employee’s federal income tax |
| every employee’s paychecks each pay period. | | | | and FICA that was withheld for the previous quarter. |
| These taxes are for federal (and possibly state) | | | | 2. Form 940(Employer’s Annual Federal |
| income tax and FICA contributions (Social Security and | | | | Unemployment Tax Return) once a year. This form |
| Medicare). The amount of income tax withheld is | | | | reports your total quarterly payroll tax deposit. This |
| determined by the number of exemptions each | | | | deposit amount is used to determine the federal |
| individual employee claimed when he/she started | | | | unemployment tax. This tax is then paid by the |
| working for you. FICA is a percentage of the | | | | business. This tax does not come out of the |
| employee’s gross earnings. Your business must | | | | employee’s paychecks. |
| match the FICA amount partially or fully. This money is | | | | The IRS states that most businesses are delinquent in |
| turned over to a bank that is qualified as a depository | | | | filing and in paying their employment taxes at one time |
| for federal taxes. A federal deposit form must | | | | or another. The IRS considers any business that has |
| accompany your payment. | | | | not paid its taxes as illegally borrowing money from the |
| Business owners must pay these taxes to the IRS | | | | U.S. Keep in mind that revenue officers can actually |
| either monthly or quarterly depending on the size of | | | | seize your assets and close your business because |
| your payroll. What is actually happening here is that | | | | you owe back taxes. |
| your business is a collecting agent for the government. | | | | To help your business minimize payroll tax problems, |
| Your employee’s taxes are held in trust until | | | | make it a priority to pay your taxes on time, i.e., pay |
| you make your payment to the IRS. | | | | Uncle Sam first! You might want to consider using a |
| The IRS also requires business owners to submit: | | | | bonded payroll tax service. They will file and make all |
| 1. Form 941(Employer’s Quarterly Federal Tax | | | | your payroll tax deposits. |
| Return) every three months. This form reports the | | | | |