Opening a small business requires a lot of attention to detail and proper management in order to be successful. This is especially true when it comes time to pay taxes on income earned. Most business owners are prepared to make the necessary payments and can plan accordingly.
However, as a business grows, its tax requirements change. An often overlooked aspect of operating a business is paying employee taxes, or payroll taxes.
Payroll taxes are the Federally and State required withholdings every business owner must track based on wages paid to employees.
Anytime you hire an employee, you are obligated to track and report the employees payroll tax.
Some employers are given a pass on payroll tax payments. Based on the nature of employer/employee relationship, these “industries” aren’t required to withhold or track wages.
Employers Allowed Exemption
All business owners are required to track and withhold the correct tax amount from each employee’s paycheck. The withholding should be kept in a Federal Tax Deposit (FTD) account.
The federal government requires reporting several times per year from business owners.
Employee wages subject to tax withholding must be filed with the Employer’s Quarterly Federal Tax Return or Form 941.
Plan to file the Employer’s Annual Federal Unemployment Tax Return (FUTA) or Form 940 during your annual income tax filing period.
Each business is required to pay based on a specific schedule. This means certain payroll tax amounts change the frequency of the required payments.
For example: The IRS will review a business’s gross tax payment to determine the schedule for deposit. If your business exceeds more than $50,000 for the year, then the payroll tax deposit becomes monthly.
This can change based on each year’s total income withholding. Knowing which schedule your business is required to pay is crucial to avoiding an audit.
North Carolina also requires withholding income tax.
The best way to prevent problems with the IRS is to work with an experienced small business accountant in Raleigh. The complex and ever changing tax laws can be a minefield for business owners. Avoid unwanted attention from the IRS by making sure your records and payments are accurate and on time.
Here are some additional payroll tax resources for business owners.
Our accountants have over 28 years experience preparing payroll taxes for Raleigh small businesses. You can be sure your business is in great hands when you work with a top accounting professional.