Employment Taxes - What Are They?
If you have employees, you are responsible for paying a variety
of taxes at the federal, state, and local levels. You must also
withhold certain taxes from the paychecks of your employees. So,
what are employment taxes?
Employment taxes include the following.
1. Federal income tax withholding
2. Social Security and Medicare taxes
3. Federal unemployment tax (FUTA).
Federal Income Taxes/Social Security and Medicare Taxes
You generally must withhold federal income tax from wages paid
to an employee. Form W-4 is used to determine the specific
amount, although most payroll services or your accountant will
do this for you.
Social security and Medicare taxes pay for benefits that workers
and families receive under the Federal Insurance Contributions
Act (FICA). Social security tax pays for benefits for the
retired, survivors, and disability insurance distribution
provisions of FICA. Medicare tax pays for benefits under the
medical care provisions of FICA. As an employer, you must
withhold a percentage of these taxes from employee and match the
withholding amount.
In general, you must deposit these taxes by check or cash to an
authorized financial institution, typically your bank. Check
with your tax professional to make sure you are not required to
use the Electronic Federal Tax Deposit System (EFTPS).
Regardless of the payment method, you will then report them on
Form 941, the Employer