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When Do Payroll Services Make Tax Payments?

If ever small businesses needed a good reason to consider contracting payroll services, making regular tax payments and filing reports is a good place to start. Small business owners can get terribly bogged down in withholding and reporting requirements to the extent that they are spending an inordinate amount of time dealing with payroll. Contracting payroll services returns that valuable time to the business owner.

For the record, traditional and online payroll services are required to withhold taxes and make payments. But the responsibility for making sure it is done correctly still lies with the employer. That’s why the employers choice of service providers is critical.

With all of that said, do you know when payroll services make tax payments? What they do regarding both payments and reporting is governed by federal and state law. State law will not be dealt with here because it can vary; requirements for satisfying federal law are listed below.

Federal Income Tax



Employers are categorized as either monthly or semiweekly payers for the purposes of income tax. Every employer is automatically made a monthly payer for the first year of business. After that, status must be determined for the coming year by taking a look at the total tax liability from the previous year.

Total tax liability includes federal income, Social Security, and Medicare taxes. Companies with a total tax liability of $50,000 or less in the previous year begin the new year as a monthly payer. All others become semiweekly payers. Monthly payments are due on the 15th of every month while semiweekly payments depend on what day of the week payday falls on. If payday is between Wednesday and Friday, payments are due on the following Wednesday. For all other pages, payments are due on the following Friday.

Social Security and Medicare Taxes



Social Security and Medicare taxes, also known as FICA, are paid along with federal income taxes. Therefore, the same schedule applies. The most important thing to remember is that employers must pay their share of Social Security and Medicare taxes at the same time.

For this reason, payroll services should be keeping their clients abreast of how much will be due for each pay period. In most cases, clients establish a separate account into which they deposit money for the purposes of meeting these tax obligations. As long as the account is well-funded, payroll service providers can make those payments without issue.

Federal Unemployment Tax



The federal government collects what is known as federal unemployment tax (FUTA) for the purposes of funding its oversight of state unemployment programs. This entire tax liability is assessed on the employer; employees pay nothing toward FUTA.

FUTA is filed and paid every quarter. It is calculated as a certain percentage of the amount the employer pays employees for that quarter. The current rate is 6% of the first $7,000 paid. Payments are due on April 30, July 31, October 31, and January 31.

If the amount owed for FUTA in any given quarter is less than $500, employers do not have to make the next quarterly payment. Instead, they can hold onto the money and roll it over into the next quarter. The tax still has to be paid; it just doesn’t have to be paid according to the schedule in amounts less than $500.

We have merely scratched the surface of tax payments and reporting for small businesses. Already it should be easy to see how complicated the process can be. If you don’t want that headache for your small business, consider contracting with a reputable payroll services provider. a href=”http://employers.benefitmall.com”>contracting with a reputable payroll services provider


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