When choosing a payroll service provider to handle payroll and payroll tax, employers need to make sure they choose a trusted payroll service that can help them avoid missed deposits for employment taxes and other unpaid bills. Typically, these clients remain legally responsible for paying the taxes due, even if the employer sent funds to the payroll service provider for required deposits or payments.
Federal law requires most employers to withhold federal taxes from their employees’ wages. Whether you’re a small business owner who is just starting or one who has been in business for a while – ready to hire an employee or two – here is what you should know about withholding, reporting, and paying employment taxes.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, made several changes to employee retention tax credits. These tax credits were previously made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The most notable change was the modification of the Employee Retention Credit (ERC). Several of the changes apply only to 2021, while others apply to both 2020 and 2021. As such, employers can take advantage of the newly-extended employee retention credit, designed to make it easier for businesses that choose to keep their employees on the payroll – despite challenges posed by COVID-19.
Starting your own business can be an exciting prospect, but there is more to it than simply writing a business plan. Also, if you expect to have employees, there are a variety of federal and state forms and applications that you need to complete to get your business up and running. That’s where a tax professional can help. With this in mind, let’s take a look at what you need to know before you start a new business.
On August 8, 2020, the President issued a Memorandum allowing employers to defer withholding and payment of an employee’s portion of the Social Security tax (i.e., the 6.2% FICA portion of the federal payroll tax on employees). Medicare taxes, however, are not covered. The payroll tax deferral is effective starting September 1, 2020, and also applies to the employee portion of the Railroad Retirement Act Tier 1 tax. While employers are allowed to defer the withholding and payment of the payroll taxes on employees’ applicable wages, they are not required to do so.
Let’s take a look at how this affects employers and employees:
Federal law requires most employers to withhold federal taxes from their employees’ wages. Whether you’re a small business owner who’s just starting or one who has been in business a while and is ready to hire an employee or two, here are five things you should know about withholding, reporting, and paying employment taxes.
Many businesses hire part-time or full-time workers, especially in the summer. These types of employees are referred to as seasonal workers, which the IRS defines as an employee who performs labor or services on a seasonal basis (i.e., six months or less). Examples of this kind of work include retail workers employed exclusively during holiday seasons, sports events, or during the harvest or commercial fishing season. Part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees.
Withholding issues can be complicated, and with the passage of the recent tax reform legislation — most of which takes effect starting in 2018 — it’s important to make sure the right amount of tax is withheld for your personal tax situation. As a first step to reflect the tax law changes, the IRS released new withholding tables in January 2018. A revised Form W-4 was released on February 28, 2018. These updated tables were designed to produce the correct amount of tax withholding.