In ancient times taxes are imposed and collected from every citizen to raise funds for the governing authorities. Benjamin Franklin once said, “Nothing in life is certain but death and taxes.” Yes, taxes are certain especially for employees. Definitely, tax deductions on income are applied every payday. Since nonpayment are penalized by the government, every income earner is obliged to fulfill such obligation.
What are Payroll Taxes?
Payroll taxes are income tax and other statutory deductions made by the employer from the employee's gross salary or wages. Generally, it has two categories: deductions from an employee’s wages, and taxes paid by the employer based on the employee's wages.
The first category is withholding tax from employees’ wages in which employers are required to withhold, it is also known as the pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG). It often covers advance payment of income tax, social security contributions, and various insurances (e.g., unemployment and disability).
The second category is a tax that is paid from the employer's own funds and that is directly related to employing a worker. It consists of fixed charges or be proportionally linked to an employee's pay. These charges usually cover the employer's funding of the social security system, Medicare, and other insurance programs.
Quarterly Federal Tax Return
Generally, employers are required to file quarterly tax returns on Form 941 with the IRS to report the wages they paid and tips their employees have reported, as well as employment taxes (federal income tax withheld, social security and Medicare taxes withheld, and your share of social security and Medicare taxes).
Payroll taxes are often remitted quarterly rather than with each payroll cycle since most small businesses do not have a large payroll total. When the employment taxes for either the current quarter or the preceding quarter are less than $2,500, taxes are with quarterly return Form 941. Employers are required to file a separate Form 941 for each quarter:
Form 941 is due by the last day of the month following the end of the quarter. For instance, you will file Form 941 by April 30 for wages you pay during the first quarter, January through March. If the due date falls on a Saturday, Sunday, or legal holiday, you may file the return on the next business day. The term legal holiday means any legal holiday in the District of Columbia.
For small companies with a total tax liability of $1,000 or less for the year, in such case employer would file annually on Form 944 provided it receives written consent from the IRS. Form 944 is due on January 31 of the following year. The purpose of Form 944 is to reduce the burden on small employers by allowing them to file one return per year, and in most cases pay the employment tax with the return.
Payment of Taxes
Generally, employers are required to deposit their employment taxes rather than pay the taxes when the Form 941 or Form 944 is filed. The tax deposit due dates for your employment taxes depends upon the size of your employment tax liability. There are four possible methods employers can use during the upcoming calendar year: annually, quarterly, monthly and semi-weekly.
Employers who are required to file Form 941 with an employment tax liability current quarter is less than $2,500, instead of making deposits you may pay the taxes for the current quarter with your timely filed return. Filers must not incur a $100,000 next-day deposit obligation during the current quarter.
For required filers of Form 944 with employment tax liability for the fourth quarter is less than $2,500, you may pay your fourth quarter liability with your timely filed return, provided you've made deposits for the first, second, and third quarters according to the applicable deposit rules. Employers below the $2,500 threshold who aren't required to make deposits and instead remit employment taxes with their Forms 941 or Form 944, have options either to deposit the taxes or pay the amount shown as due on Form 941 or Form 944 as provided by the form instructions. Employers who file Form 941 and unsure if total tax liability for the current quarter will be less than $2,500, (and liability for the preceding quarter wasn't less than $2,500), should make deposits using the semiweekly or monthly rules so you won't be subject to failure-to-deposit penalties. If you've deposited all your taxes on time, you have ten additional days after the due date of the return to file.
Finally, revenues from payroll taxes are used by the government to fund programs such as Social Security, health care, unemployment compensation and workers compensation. Sometimes collected payroll taxes are used to maintain and improve local infrastructure and programs, including first responders, road maintenance, and parks and recreation. These purposes show that taxes are not put to waste.
