Guide to Employer Payroll Taxes

You are responsible for reporting and depositing income tax and FICA for your company. However, you can choose between two deposit schedules: monthly and semiweekly. All new businesses begin as monthly depositors, but it is important to check every year to see if your status has changed:

• Monthly deposits: Monthly deposits are made by the 15th day of the following month. For example, all April employment taxes must be paid by May 15.
• Semiweekly deposits: Semiweekly payments made on a Wednesday, Thursday or Friday are deposited by the following Wednesday. Payments made on Saturday, Sunday, Monday or Tuesday should be completed by the following Friday.

Before each calendar year, you must review IRS Publication 15 (Form 941, 944 and 945) or Publication 51 (Form 943) to determine which deposit schedule your business requires. Late deposits can result in a penalty of up to 15 percent. FUTA tax (Form 940) deposits are required quarterly for tax amounts over $500. You must deposit the FUTA tax by the end of the month directly after the quarter ends.

Did You Know?: It’s important to familiarize yourself with the funds transfer system ― the Electronic Federal Tax Payment System ― for all federal tax deposits.

Federal income tax and FICA

Here are the forms you need to file for federal income tax and FICA:

• Form 941: As the Employer’s Quarterly Federal Tax Return, Form 941 is filed each quarter with information on sick pay withholding and supplemental unemployment benefits. The reporting due dates are April 30, July 31, October 31 and January 31.
• Form 943: The Employer’s Annual Federal Tax Return for Agricultural Employees is used to report agricultural wages. The reporting due date is January 31.
• Form 944: The Employer’s Annual Federal Tax Return is for employers whose annual tax liability is $1,000 or less. The reporting due date is January 31.
• Form 945: The Annual Return of Withheld Federal Income Tax is filed to report backup withholding. The reporting due date is January 31.

You will need to file these forms regarding wages and W-2 forms:

• Form W-2: The Wage and Tax Statement reports wages, tips and other employee compensation. The reporting due date is January 31.
• Form W-3: The Transmittal of Wage and Tax Statements sends W-2 information to the Social Security Administration. The reporting due date is January 31.

Self-employment

Self-employed individuals who own a business file taxes as a sole proprietor or independent contractor. You may also fall under the self-employed umbrella if you are a member of a partnership that owns a trade or company or if you’re in business for yourself ― part-time or full-time.

Self-employed individuals pay an income tax and a self-employment tax that covers their Social Security and Medicare tax contributions. You can determine if you are subject to self-employment and income taxes and whether your business made a profit or loss. To calculate your business profit or net loss, subtract your business expenses from your company income. Then, report your findings on Form 1040 or 1040-SR.

Here are the forms you’ll need if you’re self-employed:

• Form 1040-ES: The Estimated Tax for Individuals form helps you estimate your income taxes and FICA since you have both the employer and employee tax responsibilities.
• Schedule C: The Profit or Loss From Business form is for annual tax returns, as it calculates your business profit or loss.
• Schedule SE: The Self-Employment Tax form is for the calculation of FICA. It includes Form 1040 or 1040-SR.

Bottom Line: There are specific self-employed tax considerations. If your self-employment net earnings are $400 or more, you must file an income tax return. If your earnings were less than $400, you still might have to file because of additional filing requirements listed on Form 1040 and 1040-SR.

FUTA

When you file your FUTA return, you’ll need Form 940.

• Form 940: FUTA is only paid by the employer. The reporting due date is January 31.

If your small business is incorporated but doesn’t have any employees, you are required to pay federal, state, local and FICA taxes because you are the sole employee of your company.

However, you are considered self-employed if you do not have any staff and are not incorporated. Therefore, you are required to report and pay taxes on your income quarterly.

January is the busiest month for payroll taxes. Consider scheduling some time before the end of the year to gather and complete all of the required forms. Even if you use an accountant to complete payroll taxes, you must ensure they have all the necessary information to meet the required deadlines.

Here are the payroll tax deadlines for the calendar year:

• January 31 or February 1: If January 31 falls on a Sunday, then all quarterly filings for Q4 and year-end filings are due on February 1.
• April 30: This is when Q1 quarterly filings are due.
• August 2: This is when Q2 quarterly filings are due.
• November 1: This is when Q3 quarterly filings are due.
• 15th of every month: If the 15th day of the month falls on a weekend, payroll tax payments for the previous month are due on the following Monday. For example, you should submit your payroll tax payments for March on April 15.

Yes. The Tax Division of the Department of Justice pursues criminal investigations and prosecutions against individuals and entities that willfully fail to comply with tax responsibilities, as well as those who aid in such situations. Financial penalties are calculated based on the number of days your payment is late.

If you fail to file Form 941 or Form 944 by the deadline, your business will have to pay a 5 percent fine for the total tax amount due. You will be charged an additional 5 percent each month that the return is not submitted to the IRS (up to five months).