5 Key Employer Payroll Tax Responsibilities
Employers generate a payroll report by calculating the gross monthly wages plus statutory and voluntary payroll amounts to get the net pay. They also have certain responsibilities concerning payroll taxes, and understanding these responsibilities prevents business owners from getting on the wrong side of the law or being held personally accountable under IRS section 6672. Here are the five main employer responsibilities for payroll taxes.
1. Statutory Payroll Deductions
The law requires employers to withhold payroll taxes from an employee’s paycheck. Some of the payroll tax deductions include:
• Federal income tax
• Social security tax
• Medicare tax
• State income tax
• Local taxes like city, county, unemployment insurance, and state disability
2. Voluntary Payroll Deduction
The law also requires employers to withhold voluntary payroll taxes from an employee’s paycheck if he or she allows the deduction. These deductions are for the various benefits that an employee has subscribed to. Some of the common voluntary payroll deductions are:
• Life insurance
• Health insurance
• Retirement plans
• Stock purchase plans
3. Funds for Payroll Taxes
Employers are supposed to set aside funds for payroll taxes. These funds include employee and employer portions of Medicare, social security, unemployment compensation, and workers’ compensation.
4. Remittance of Payroll Taxes
The duty of withholding taxes is not complete until the taxes are channeled to the appropriate tax agencies. For instance, Medicare, social security, and federal income taxes should be remitted to the IRS. Employers should also report tax liabilities to their employees and the right authorities in accordance with the law.
5. Preparation of Financial Reports
Another crucial role in the fulfillment of payroll tax obligations is the preparation of reconciliation reports, filing tax returns, and accounting for payroll expenses through financial reports. Some of these reports should be provided to the appropriate local, state, and federal agencies.
An employer should set up an efficient payroll system that helps them meet their payroll tax obligations. Understanding the main payroll deductions is one way for an employer to ensure that their payroll system is valid.
If you’re a business owner with unpaid employment taxes in San Diego and are worried the IRS will hold you personally accountable and possibly assess an IRS 100 percent penalty or place an IRS lien on your personal property, we can help. We’ve been serving San Diego residents and business owners for over two decades and help clients find the relief they need before tax problems get worse. Reach out to us today at (844) 780-1100 and schedule a free consultation.