Cello HR is here to make your life easier when it comes to federal payroll taxes. Social Security tax, Medicare tax, and FICA taxes are important things you need to withhold from employee paychecks to stay within payroll tax compliance. Our payroll tax solutions can help you make sense of all this and ensure that your payments are made on time, every time. Here are some important things to know about federal payroll taxes.
What Are Federal Payroll Taxes?
Federal payroll taxes are the taxes you pay on all your employees' wages and salaries. Depending on what state your business is located in, you might also owe state payroll taxes.
The main types of federal payroll taxes include:
- Social Security Tax
- Medicare Tax
- Federal Unemployment Tax
Social Security and Medicare taxes are two forms of taxes under the Federal Insurance Contributions Act (FICA). Social security taxes are levied at a rate of 12.4 percent, up to a maximum amount of an employee's wages that changes each year. These taxes are evenly split between the employer and their employees. Medicare taxes are levied at a rate of 2.9 percent, split between the employer and workers. There is no wage cap on Medicare taxes. Higher-income earners pay a 3.8 percent tax.
Employers are also responsible for withholding for the Federal Unemployment Tax Act (FUTA). This is a 0.6 percent tax levied on the first $7,000 of an employee's wages (up to $42 per year per employee). This is also separate from state unemployment insurance taxes.
How to Send Payment for Federal Payroll Taxes
Employers are required to deposit federal payroll taxes for social security, Medicare, and income taxes on either a monthly or semi-weekly schedule. You must decide which schedule you will use at the beginning of each year. To determine which schedule you are supposed to use, refer to the Internal Revenue Service's (IRS) Publication 15.
Federal tax deposits are made through the Electronic Federal Tax Payment System (EFTPS). The EFTPS allows you to pay your employer payroll taxes in one of two ways. It can be paid through an electronic funds transfer, which is the most common method. Payments can also be made by telephone by calling (800) 555-3453. Payments should be made based on the deadlines outlined in the IRS Employment Tax Due Dates page. If unemployment insurance (FUTA) taxes exceed $500 in a fiscal quarter, they must be deposited by the end of the first month following that quarter.
How to File Federal Payroll Taxes
The process for filing federal payroll taxes is fairly straightforward once you know which forms are required for your type of business. You complete the proper forms, file them electronically with the IRS, and deposit the payment before the deadline. We will cover the most common forms in the next section, including the W-2, the W-4, and Form 941.
Employer payroll taxes are generally paid on a quarterly or annual basis, depending on the type of business you own. Any employer who fails to deduct the proper amount of payroll taxes from employees can be subject to fines and penalties. Depending on how severe a violation is, penalties can include monetary fines and even jail time.
Common Forms for Federal Payroll Taxes
You can find many of the most common payroll tax forms needed here on our Employer Forms page at Cello HR.
Form W-2: This is a form you are required to file for each employee that you pay more than $600 in a calendar year. You provide a copy of each employee's W-2 to them before January 31 each year, so they can use it to file their individual income taxes.
Form W-4: A W-4 is a form you provide for each of your employees. When they fill the form out, it alerts you to the correct amount of federal income tax you should withhold from their pay. Employees should update their W-4 whenever their personal or financial situation changes, such as when they get married or gain a new dependent.
Form 941: This form is used to report the federal income tax and FICA taxes withheld from your employees' paychecks. The form is also used to pay your share of each employee's social security or Medicare tax. Form 941 is usually filed every quarter.
How to Stay Compliant with Federal Payroll Taxes
The IRS page on Employment Tax Recordkeeping explains all of the documentation that you are required to keep on file for IRS review if needed. All records on employee payroll taxes and other documentation need to be kept for at least four years after the filing at the end of the fourth quarter of the year.
As mentioned above, penalties for noncompliance can result in fines from the IRS and even jail sentences for severe violations of federal withholding tax.
Let Cello HR Handle Your Federal Payroll Taxes
Schedule a meeting with Cello today to learn more about our expert tax filing services. Our experienced team will help you navigate complex tax laws and regulations, ensuring that your filings are accurate and on time.