THE FULLERTON REPORT | JANUARY 2009
Employment Taxes
Federal Income Tax and Social Security and Medicare Taxes
You generally must withhold federal income tax from your employees' wages. You withhold part of Social Security and Medicare taxes from your employees’ wages and you pay a matching amount yourself. To figure how much to withhold from each wage payment, use the employee’s Form W-4 and the methods described in Publication 15, Employer’s Tax Guide and Publication 15-A, Employer’s Supplemental Tax Guide (PDF).
Federal Unemployment (FUTA) Tax
You report and pay FUTA tax separately from Federal Income tax, and Social Security and Medicare taxes. You pay FUTA tax only from your own funds. Employees do not pay this tax or have it withheld from their pay. Refer to Publication 15, Employer’s Tax Guide and Publication 15-A, Employer’s Supplemental Tax Guide (PDF) for more information on FUTA tax.
Depositing Employment Taxes
In general, you must deposit income tax withheld, both the employer and employee Social Security and Medicare taxes (minus any advance EIC payments), and FUTA tax by depositing electronically, mailing or delivering a check, money order, or cash to a financial institution that is an authorized depositary for federal taxes using Form 8109-B. You can also make your deposits using the Electronic Federal Tax Payment System (EFTPS). Some taxpayers are required to deposit using the EFTPS. See Publication 15, Employer’s Tax Guide, under How to Deposit - Electronic Deposit Requirement.
Reporting Employment Taxes
In general, employers are responsible to report federal Income Taxes, Social Security, and Medicare taxes on Form 941, Employer's Quarterly Federal Tax Return, or Form 943, Employer's Annual Federal Tax Return for Agriculture Employees (for use by farm employers).
Note: Employers who have an employment tax liability of $1,000 or less for the year may file Form 944, Employer's Annual Federal Tax Return, instead of Form 941, Employer's Quarterly Federal Tax Return. Eligible taxpayers will be notified by mail.
Report FUTA taxes on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.
Preparing and Filing Form W-2
At the end of the year, the employer must complete Form W-2, Wage and Tax Statement (PDF) to report wages, tips and other compensation paid to an employee. A copy of this form must be given to the employee by January 31st after the end of the year. You must also send a copy of the W-2 to the Social Security Administration (SSA). Employers can prepare and file up to 20 W-2s at a time at the Social Security Administration’s Web site. Using SSA’s online W-2 filing, employers can also print out all the necessary copies of the W-2 for their employees, state taxing agencies, etc.
Adjusting Employment Taxes
If correcting employment tax errors on previously filed employment tax returns is required, refer to Adjusting Employment Taxes.
