Nothing can trigger an IRS audit quicker than a company not properly reporting and paying Employment Tax on its employees, so it is very important for an employer to stay compliant by always keeping the proper documentation. There can be devastating consequences to both employers and employees when these taxes are unpaid because the IRS takes a very hard stance on any business that mismanages this process. Here are a few tips directly from the IRS to ensure your company stays in compliance.
Federal Income Tax and Social Security and Medicare Taxes
You generally must withhold federal income tax from your employees’ wages. You withhold part of Social Security and Medicare taxes from your employees’ wages and you pay a matching amount yourself. To figure how much to withhold from each wage payment, use the employee’s Form W-4 and the methods described in Publication 15, Employer’s Tax Guide and Publication 15-A Employer’s Supplemental Tax Guide.
The Internal Revenue Service recently released instructions to help employers implement the 2011 cut in payroll taxes along with new income-tax withholding tables that employers will use during 2011.
Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011, but not later than Jan. 31, 2011.
Federal Unemployment (FUTA) Tax
You report and pay FUTA tax separately from Federal Income tax, and Social Security and Medicare taxes. You pay FUTA tax only from your own funds. Employees do not pay this tax or have it withheld from their pay.
Depositing Employment Taxes
The IRS has issued proposed regulations that provide that beginning January 1, 2011, taxpayers must deposit all depository taxes (such as employment tax, excise tax, and corporate income tax) electronically using the Electronic Federal Tax Payment System (EFTPS).
Under these proposed regulations, Forms 8109 and 8109-B, Federal Tax Deposit Coupon, cannot be used after December 31, 2010.
For more information check the IRS list of Frequently Asked Questions or contact our office. We will be happy to assist you with your tax needs.
