If you have employees, you have to pay payroll taxes to the Federal government as well as to your state and possibly your local city or town government. It’s a big job to keep track of all the things you must do to stay compliant. This page is here to help, but is only a start, as you will see.
First off, lets talk about the Feds, because the biggest payroll tax chunk goes to them.
As an employer, you must deposit federal income tax withheld for each employee as well as Social Security and Medicare taxes. In most cases, you will deposit these funds every two weeks or monthly, but it is possible that you will need to deposit more often if your payroll is high.
Knowing how much to withhold and how often to make deposits is a big topic — so big that you should consult the IRS’ word directly. You can download Publication 15, Circular E: Employer’s Tax Guide for specifics.
To actually make this deposit, you must use the Electronic Federal Tax Payment System at https://eftps.gov/eftps/. An EFT Trace Number will be provided with each successful payment in case you need to prove your deposit was made.
That’s just the deposits, though. You’ll also need to file a quarterly report of all the deposits on Form 941 (most employers) or Form 944 (certain smaller employers). You can file that form online at http://irs.gov/efile.
Now you know why people have tax preparers, right? It’s a complicated business. If you’re going it alone, though, Publication 15, Circular E: Employer’s Tax Guide will be your guide not only for depositing and filing correctly, but also for finding out if there are any exceptions to the rules based on the size or nature of your business.
State Payroll Taxes
Federal payroll taxes are only the beginning, though. You will also withhold money for employees’ state taxes, and have to pay for unemployment insurance and other employer contributed taxes, which vary by state. Because there are 50 states, this topic is too big for this page, but we wanted you to know that this is another step in getting your business payroll taxes paid. Consult your state’s Department of Taxation for specific requirements.
Local Payroll Taxes
You will probably have to deal with local taxes as well. Because there are even more cities than there are states, this topic is too huge for any detail on this page — consult your city government to find out local requirements, or get your tax preparer on the case.