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  • Business Tax Basics for Beginners
    Game Plan

    3 Steps to Filing Employment Taxes

    Running a business with employees definitely adds several line items to your tax responsibilities. Specifically, you’re required to report and deposit employment taxes, which include federal income taxes, Social Security and Medicare taxes, and Federal Unemployment (FUTA) taxes. Here is a list of employment tax due dates.

    Depositing Employment Taxes
    According to the IRS website, you must deposit any federal income tax withheld, plus both the employer and employee Social Security and Medicare taxes. The IRS has monthly and semi-weekly deposit schedules and you can determine which schedule applies to your business by reviewing either IRS Publication 15 or 51.

    FUTA tax deposits are required for any quarter in which the tax is more than $500 and must be made by the end of the month following the end of the quarter. The FUTA tax is paid entirely by you, the employer, and is not withheld from your employees’ wages.

    All federal tax deposits must be made electronically through the Electronic Federal Tax Payment System (EFTPS). To enroll, visit the website or call 1-800-555-4477.

    Reporting Employment Taxes
    Generally, you must report wages, tips and other compensation paid to your employees by filing Form W2 with the IRS at the end of the year. This is in addition to reporting the taxes you deposit. The reporting of income, Social Security and Medicare taxes is done each quarter using Forms 940, 941 (for most businesses) and 944 on paper or through e-file. FUTA tax is reported annually using Form 940.

    Maintaining Tax Records
    You should keep all records associated with your employment taxes, including amounts and dates of all wage and pension payments made to all employees, for at least four years.

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    Game Plan

    Consult with your tax professional to make sure you’re taking full advantage of the federal and state tax laws, and for general guidance as you work through tax-related issues.

    • Take advantage of the many tax-related resources the U.S. Small Business Administration has available online.
    • Download Publication 15 (Circular E) Employer’s Tax Guide from the IRS website.
    • Review the list of employment taxes and their due dates on this IRS page.
    • Download and review IRS Publication 15 or 51 to determine which income tax, Social Security and Medicare deposit schedule applies to you.
    • Enroll for mandatory electronic payments of federal taxes through the Electronic Federal Tax Payment System (EFTPS) online or call 1-800-555-4477.
    • Become familiar with required tax forms: File Form W-2 with the IRS at the end of the year. See the IRS website for full information. Report Social Security and Medicare taxes quarterly through Form 941 (for most businesses). Use Form 940 for annual FUTA tax reporting.
    • Maintain your tax records for at least four years.