We all have to pay our fair share of taxes. It’s a reality we just can’t escape.
But sometimes people try. Missed deadlines or membership in the payment avoidance club are not helpful ways to deal with mounting tax debt. Eventually, we all have to face the music, either voluntarily or at the behest of the IRS.
It’s no different for businesses. And one tax payment you as a business owner don’t want to miss (or avoid) is payroll taxes because that bill can add up quickly.
Many Chesapeake businesses find themselves in this difficult situation because they overlook filing things properly. Often there’s an assumption their bookkeeper (or their payroll software) is handling it. But, sad to say, that’s not always the case. 🙁
And post-pandemic tax world has seen a lot of shifts in policy including an increase in the wage amount for which social security tax payments are required. Clearly, it’s going to be imperative to stay on top of payroll taxes in the next few years.
So, in an effort to get this on your mind and help you avoid any hot water situations, I thought I’d take some time today to revisit the topic.
How Chesapeake Businesses Can Stay on Top of Payroll Taxes
“Taxes are paid in the sweat of every man who labors.” – Franklin Roosevelt
One critical set of taxes all business owners need to stay on top of is payroll taxes. Unfortunately, some (especially owners just starting out) don’t know how to pay them.
Is that you? Or a business owner friend you know? For any business needing to take care of payroll taxes, send them the below information to help them get a start – and, of course, feel free to send them our way if they find themselves behind.
The good news is that the IRS has simplified the payment process by offering an online payment portal – an important option considering the IRS’s current backlog.
So, let’s discuss the details of payroll taxes and how to pay them.
The taxed payroll given to employees should include federal income tax withholding, FICA-related taxes (including Social Security and Medicare), and federal unemployment taxes.
With regard to payroll taxes, employers are responsible for withholding taxes from the wages of their employees, making calculations with regard to their own share of taxes, depositing payments on a regular schedule, and quarterly and annual tax reporting obligations. All of these tasks involve a variety of tax forms and calculation methods and can get complicated very quickly.
Getting on a deposit schedule
One important thing to note here is that a deposit schedule is not determined by how often you pay employees or make deposits. The deposit schedule you must use is based on the total tax liability you reported during a lookback period.
Generally, a lookback period is the total amount of employment taxes reported by an employer over a 12-month period by the culmination date (June 30th).
Whew! I know that’s a little confusing … look at it this way: 2021’s payroll tax deposits would be the 12-month period that begins July 1st, 2021, and ends June 30th, 2022.
Now, if you still have questions about the look-back period, give me a call. I’d be glad to answer those for you.
Once you figure out the look-back period, you will fall into one of three buckets:
- If payroll obligation is <$2,500 then you deposit a “timely filed return” (with Form 941).
- If payroll obligation is $50,000 or less, then you deposit monthly.
- If payroll obligation is more than $50,000, then you deposit semi-weekly.
Making electronic payments
You can submit electronic payroll deposits by enrolling in EFTPS. Once you’ve signed up, you’ll provide your business banking info (account + routing number) and schedule payments according to the schedule. You can schedule up to 1 year in advance, and the EFTPS will record all payments for your records.
No matter your payroll status, it’s vital this payment component is a part of your Chesapeake business’s routine. Similar to holiday bonuses, payroll payments are one way to take care of your people after all of their hard work.
Payroll taxes can be complicated. If you’re not sure where to start or you’re behind on quarterly payments, let’s talk:
I’m here to answer your questions and help you stay out of hot water with the IRS.
In your corner,
Anchor Tax Relief LLC