Payroll Taxes and Employer Responsibilities

FUTA is an employer-paid payroll tax reported and paid annually using IRS Form 940 Employer’s Annual Federal Unemployment Tax Return. You calculate FUTA at 6% on the first $7,000 of wages paid to the employee in a calendar year. It isn’t withheld from the employee’s paycheck — you as the employer pay it. States are responsible for paying unemployment benefits to eligible workers who are involuntarily terminated. The more claims made by former employees, the higher the tax rate.

If total payments to an independent contractor in the year are $600 or more, the business must file an annual information return—Form 1099-NEC—to report the payments to the worker and to the IRS. Payroll taxes must be deposited electronically through the Electronic Federal Tax Payment System, or EFTPS. Small employers, who are permitted to pay their employment tax when filing their employers responsibilities for payroll do not include: annual employer tax return, can opt to use EFTPS. Under the FTC’s new rule, existing noncompetes for the vast majority of workers will no longer be enforceable after the rule’s effective date. Employers will be required to provide notice to workers other than senior executives who are bound by an existing noncompete that they will not be enforcing any noncompetes against them.

Business Insurance

However, outside of regular wages, other types of wages are called supplemental wages. As mentioned above, employees see multiple types of payroll taxes deducted from their wages. However, employees are only responsible for submitting accurate W-2 forms and keeping the company updated on family or life changes that require Form W-2 updates. Employee A receives a paycheck for a 2 week pay period that shows their gross earning at $2,000. Now, we know the total FICA tax amounts to $306 but, let’s look at how this is broken down.

The Old-Age, Survivors, and Disability Insurance portion is taxed at a 6.2% rate on the amount up to an annual “wage base.” In 2023, that wage base is $160,200. In most cases, you should not send any tax payment along with Form 941. You’ll need to separately deposit the FICA taxes and withheld income taxes that you report on Form 941. You can deposit these taxes on the Electronic Federal Tax Payment System (EFTPS). Tax deposits are due on either a semiweekly or monthly schedule depending on the amount of your payroll tax liability during a one-year lookback period (July 1 to June 30).

Once I’ve Calculated My Business Employment Taxes, How Do I Submit Them?

At the end of the day, with the sheer number of taxes, rules, and deadlines, payroll taxes can seem very intimidating. FICA taxes are used to fund the nation’s social security and Medicare programs, and both employers and employees pay these taxes. If you do your own payroll, reach out to a tax professional when you have questions about how payroll works for your employees. State unemployment taxes (SUTA) fund the majority of most unemployment benefit programs. Administered at the state and territorial level, the programs provide temporary compensation to people who’ve lost their jobs through no fault of their own.