What All Small Business Owners Must Know About Payroll Taxes
Apart from managing day-to-day operations, small business owners also need to make certain that they stay current with the various federal, state, and local tax obligations. Although some business owners have a bookkeeper or accountant to help with their tax issues, knowing your specific tax obligations would help you better understand your cash flow and keep you out of trouble with the taxman.
What Exactly are Payroll Taxes?
Payroll taxes are taxes tied to your employees’ pay every month. Some of them must be withheld or taken out of your employee’s pay, while others you have to pay for. These include the following:
- FICA, Federal Insurance Contributions Act
- Local, state, and federal income taxes
- Federal and state worker’s compensation funds
- Unemployment taxes
The top accountants in Salt Lake City noted that as a small business owner, you have specific tax obligations you need to observe. In general, you’re responsible for:
- Withholding local, state, and federal taxes that you need to pay from each employee, as well as FICA taxes, that you should match as the employer.
- Allocating funds for these taxes, which include your and your employees’ portions of Medicare/Social Security, as well as worker’s compensation and unemployment taxes.
- Paying the right taxes to the appropriate agencies, including your taxes and your employees’ taxes. For instance, you need to pay Medicare/Social Security and federal income taxes to the Internal Revenue Service (IRS), and FICA taxes withheld from your employees’ paychecks, plus your own FICA taxes.
- Reporting tax liabilities. This includes the Unemployment Tax Report and the Employer’s Quarterly Wage and Tax Report.
- Providing other essential reports, such as reporting employment statutes of new employees, to local, state, and federal agencies.
It’s best that you accurately calculate the payroll taxes you owe and pay them on or before the deadline. If you fail to comply with the tax rules of the IRS, you risk facing civil and criminal sanctions, as well as hefty fines. That said, consider seeking help from an experienced accountant to help you avoid legal trouble.