Employment taxes – which include federal income taxes, Social Security and Medicare taxes, and the Federal Unemployment Tax (FUTA) – are required to be paid by employers in the State of California. The frequency at which these taxes are paid, the method used the pay them, and what must be reported is prescribed by the IRS. Figuring out when and how to pay employment taxes can be difficult for employers, but it doesn’t have to be with the help of Sacramento employment tax accountants from Cook CPA Group.
Sacramento-area employers that would like to use the help of employment tax accountants from Cook CPA Group are encouraged to get in touch as soon as possible.
Types of Taxes Sacramento Employers Must Pay
There are a few different types of taxes that employers and self-employed individuals must pay. The most substantial among those taxes is the federal income tax. The federal income tax is generally withheld from employees’ wages by employers to be paid to the IRS. The type of business that an employer is classified as (whether they are an S corporation, LLC, or some other type) determines the way that the employer deposits their withholdings. The amount for a withholding allowance is $4,200 in 2019.
Another tax that employers must pay is a Social Security and Medicare Tax. Employees are required to pay this tax, and employers must pay a matching amount. Employees are taxed for Social Security at a rate of 6.2%, with a base limit of $118,500. These taxes are known as FICA taxes since they are mandated by the Federal Insurance Contributions Act.
Employers must also pay additional Medicare taxes. Additional Medicare taxes are imposed at a rate of 0.9% on an employee’s wages and compensation that exceeds a certain threshold. Employers begin withholding the Additional Medicare Tax during the first pay period in which the employee’s income exceeds the threshold of compensation. Employers are not required to match employees’ withholdings for this tax.
Employers must also pay the Federal Unemployment Tax (FUTA). This is not withheld from employees’ paychecks. This tax must be deposited during any quarter in which the amount in taxes due exceeds $500.
How to Deposit Taxes with the IRS
Taxes paid by employers must be paid through the Electronic Federal Tax Payment System (EFTPS), which is a free service provided by the Department of Treasury. Sacramento employers that do not want to pay their tax deposits through this service may arrange for a tax professional, financial institution, payroll service, or other third party to make their deposit for them.
Employers can choose whether they will follow a monthly or semi-weekly deposit schedule at the beginning of each calendar year. If an employer chooses to follow a monthly deposit schedule, they can deposit their taxes to the EFTPS on the 15th day of the month that follows whatever month they are depositing taxes for. If an employer chooses to follow a semi-weekly deposit schedule, they can pay their employment taxes multiple times per month. Deposits for FUTA taxes must be made on the last day of the first month that follows the end of a financial quarter.
If an employer in Sacramento fails to make tax deposits to the EFTPS in accordance with the deposit schedule they’ve chosen, they will likely face failure-to-deposit penalties. These penalties can be up to 15% of the amount of their normal deposit.
How to Report Income to the IRS
Wages, tips, and other forms of compensation must be reported to the IRS. This information can be reported to the IRS using forms that are specific to the industry in which they do business. Employers are also required to prepare and file W-2 Forms at the end of each calendar year, which reports information about employees’ wages and other forms of compensation to the IRS.
In addition to reporting the compensation that employees receive, Sacramento employers must also report the tax deposits made to the Electronic Federal Tax Payment System, their annual federal unemployment tax return, their payroll tax return, and their annual withheld federal income tax return. It should also be noted that employers have to file reports with state and local tax agencies.
Most of the forms used for reporting employee income are due by January 31 following the year that is being reported on; reporting on employees’ tips is due by February 28 following the year being reported on. Consult the IRS website for more information about the forms needed for reporting compensation and the dates that they are due.
Self-Employment Taxes for Sacramento Employers
People that work for themselves will have to pay self-employment taxes. These taxes go to Social Security and Medicare and are similar to those normally withheld from the pay of employees. The self-employment tax rate is 15.3% — 12.4% for social security and 2.9% for Medicare. It can be filed using Form 1040. Self-employed people must pay self-employment taxes if they earned more than $400 through their self-employed work.
Sacramento Accountant for Employment Taxes
The Sacramento employment tax accountants that work with Cook CPA Group are available to help employers throughout the area pay their employment taxes on time and accurately. They are eager to put their experience to use to provide assistance to you and your business.