Employee taxes can be one of the most difficult to understand areas of running a business and hiring employees. If business owners don’t understand all of the complexities involving employee payroll tax, it can also get them into a heap of trouble.
The first employee tax factor they should understand is what taxes the are responsible for as an employer. There are three employee taxes that they will be responsible for paying.

The first is Medicare and Social Security tax. This is often referred to as FICA and provides welfare benefits funding for senior citizens. As an employer they are responsible for paying half of the FICA taxes and withholdings for their employees while the remaining half is withheld from their paycheck.

They are also responsible for paying federal unemployment tax. This tax funds the state unemployment benefits and the administrative costs associated with those benefits. It is important for they to know that they must pay federal unemployment tax on the first $7000 earned by each person they employ during the calendar year.

In addition to federal unemployment tax, they must also pay state unemployment tax. These taxes are based on the location and size of their business as well as the number of employees they employ. Due to the fact that each state operates its own unemployment program, these rates do tend to vary; so it’s best if they check with their own state’s unemployment division for specific details.

In addition to the taxes they must pay as an employer, they are also responsible for withholding employee tax. Even though this is the employee’s contribution, it is their responsibility to handle the employee tax withholding. They will need to pay close attention to the employee tax form, or W-4, completed by the employee in order to know exactly how much money they need to deduct from the employee’s paycheck. Usually the amount of money they must withhold will depend on the number of withholding allowances claimed by the employee, their marital status and any exemption from withholding taxes that the employee might claim.

It is very important that they stay on top of their employee’s tax forms because they have the right to change them by submitting a new W-4. If an employee submits a new employee tax form, thereby changing the amount of their withholding and they fail to deduct the correct amount of money, they could be subject to penalties by the IRS.

They will need to deposit both the taxes that they are responsible for paying along with the employee tax withholdings in an authorized depository for Federal taxes. They can do this by either mailing or delivering their check or money order. These taxes will be due either semi-weekly or monthly. Their employee tax withholding due dates will be determined by the size of their payroll, dictated by the schedule. Usually, however; if their payroll is less than $2,500 every three months, they can file quarterly. If their employee taxes are larger, they’ll need to file more often.

In addition to the employee taxes named above, recently there has been much discussion in the media regarding a proposed employee health tax. If instituted this tax would impose a $3000 tax on employers for each employee who is not covered by health insurance. The intend of the proposed bill is to force employers to cover more employees by health insurance; however critics of the bill claim that the proposed employee health care tax will only lead to more unemployment.

Summary: As most employers know, employee taxes can be a real headache. Unfortunately, the employee payroll tax problem is a headache that simply must be endured. With a little understanding and careful attention to detail; however the hassle of filing employee tax withholdings can be a little less of a bother.

Matt Bacak, The Powerful Promoter and Entrepreneur Magazine e-Biz radio show host, became a "#1 Best Selling Author" in just a few short hours. He has helped a number of clients target his specialty, opt-in email direct marketing systems. The Powerful Promoter is not only a sought-after internet marketer but has also marketed for some of the world's top experts whose reputations would shrivel if their followers ever found out someone else coached them on their online marketing strategies. For more information, visit Bacak's site at http://www.powerfulpromoter.com or sign up for his Powerful Promoting Tips at http://www.promotingtips.com
 

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