1.Am I required to have workman’s compensation insurance?
If an employer has 5 or more employees they are required to carry workman’s comp insurance unless the business is in the construction industry, then you are required to carry workman’s comp on one or more employees.
2.How much do I withhold from my employee's check for a child support garnishment?
A child support garnishment can withhold up to 50% of the employees wedges that is increased by 10% if the employee does not support a second family and/or 5% if in arrears greater then 12 weeks. This is the maximum by law that chilled support services can withhold although may only wish withhold 50% even if the employee is in arrears and does not support a second family. There will be a maximum amount on the first page of the garnishment. The employer is liable for the accumulated amount they should have withheld and any penalties set by the state or the courts if they fail to withhold.
3.What is payroll?
As an employer, you have specific payroll responsibilities that are required by government agencies. These agencies can be federal, state or local. Some of these responsibilities include, but are not limited to, withholding amounts from your employees' compensation to cover income tax, social security, Medicare, and other payments. This section is designed to help familiarize you with the basic concepts of payroll management and introduce options to help make the process easier. Consult with a tax professional or accountant to address all of your business' specific needs.
4.What are payroll taxes?
Any tax levied by a government agency on employees' wages, tips, and other compensation. The amounts withheld by employers from employees' pay for federal income, social security, and Medicare taxes are considered as trust fund taxes. They are referred to as trust fund taxes because the money is held in a special trust fund for the U.S. government. Amounts withheld for state and local income taxes are held in trust for the state or local government.
5.What are my responsibilities as an employer?
Reporting and depositing payroll taxes to the appropriate agency in an accurate and timely manner is vital to your business. Late or inaccurate deposits may result in penalties and interest charges. These complex payroll tax requirements may seem intimidating but by learning a few simple concepts, you will be able to understand your payroll responsibilities and choose the best method for meeting them.
6.Am I required to withhold state taxes?
Most of the 50 states require that state income taxes be withheld on employee earnings in the state in which they work. State, which do not have state income tax are:
Calculating and reporting tax withholding amounts requires familiarity within the laws of the state(s) in which your company operates. Check with your state for exact withholding requirements.
Some local entities (city, county, parrish or school district) also have withholding and reporting requirements. Like the states, most local entities that require reporting and withholding have patterned their laws after federal tax codes.
Whether you calculate your payroll yourself, have it done by an accountant, or use an outside service, federal and state laws dictate that reporting and payment of all payroll taxes are the employer's responsibility. Timeliness and accuracy are of utmost importance, so the method you choose for doing payroll is a vital business decision. Reliable software will help you make accurate calculations, but you still have to ensure that deposits are made on time. A reputable payroll service will generally make deposits for you and will share your liability for penalties if errors occur.
7.How long should I keep employee records?
Federal and some state laws require that employers keep certain records for specified periods of time. With regard to payroll, the W-4 form (on which employees indicate their tax withholding status) must be kept on file for all active employees and for four years after an employee is terminated.
8.What are my Federal Tax responsibilities?
It is the employer's responsibility to remit trust fund taxes to the appropriate taxing agencies. Two key components of this responsibility are accuracy in the dollar amounts of the deposits and timeliness in making these deposits.
Money withheld from employees' paychecks should be deposited in an account separate from the account(s) that the business uses for day-to-day operations.
Tax deposits must be made according to the IRS timetable. If an employer does not follow this timetable, the employer may be subject to penalties and interest for making late payroll tax deposits. The IRS does not treat the matter of late payroll tax deposits lightly, given that the employer is a trustee of these employee taxes.
The deposit schedule for federal payroll taxes is either semi-weekly or monthly depending on the size of the employer's total payroll. The size of an employer's payroll tax liability is based on the total amount of payroll taxes paid during the 12-month period ending on June 30 of the prior year. This is called the lookback period. If the total payroll tax liability during the lookback period is greater than $50,000, then the employer must make deposits on a semiweekly basis. If it is less, then the employer must make deposits on a monthly basis.
Other situations may impact the frequency in which employers must file their payroll taxes. For example, whenever an employer has accumulated withholding of $100,000 or more on any one day during a deposit period, the full amount must be deposited by the close of business on the next business day. The employer is also then required to follow a semiweekly deposit schedule for the remainder of the year. Beginning 1/1/01, if an employer's tax liability for the return period is less than $2,500 (line 13 of Form 941) the employer is not required to make deposits and may pay the taxes with the return. For more information about special deposit requirements, consult the IRS publication Circular E.