10 Things You Must Know About Small Business Employee Taxes

When a new business owner is first starting out, there are many details to consider. So many in fact, that some of the critical points of concern can be inadvertently overlooked in the midst of all the business start up activities. It is an absolute must that a new small business owner gets off on the correct foot as far as business employee taxes are concerned. The Internal Revenue Service (IRS) is the source for information on how to take care of this very important detail.

These are the basic considerations:

1. Get an EIN or Federal Employer Identification Number so that you can hire people and levy their taxes.

2. Next, you have to identify the taxes that come out of the pay checks. There are federal, state, and local or municipal taxes including Federal income tax, Social Security and Medicare, and Federal unemployment tax (FUTA)

3. Pretty much you have to withhold federal income tax from the employee wages. Go to the Small Business information on the IRS web site.

4. You also have to withhold part of the Social Security and Medicare taxes from the wages, and you also pay the same amount yourself.

5. Report and pay the unemployment tax separately from the others and you pay it from you own money. Employees do not pay this tax. This is paid annually.

6. Pay the income tax, the Social Security, and Medicare on a quarterly basis, unless you qualify for the new annual payment by having an employment Tax liability of $1,000 or less for the year.

7. You can pay online now which makes it really easy and the least expensive.

8. At the end of the year use the W-2s to report wages, tips, and other payments, the withheld income tax, and the Social Security tax.

9. Give a copy of the W-2 to your employee before January 31 st.

10. Send a paper copy to the Social Security Administration by the last day of February or electronically by March 31st.

You will want to keep in mind that if you are planning to apply for small business start up funding, your taxes must be in order. Any banker or alternative lender will expect this.