— Employment Taxes
EMPLOYEE OR INDEPENDENT CONTRACTOR?
It is critical that you, the employer, correctly determine whether the individuals working for you are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.
Click here to see what the IRS considers the difference between Employees and Independent Contractors
If you have at least one employee you are responsible for employment taxes. It is pertinent that the following taxes are prepared and filed in a timely manner:
Social Security and Medicare Taxes- You must withhold and report the employees portion and as the employer you must match that amount equally, deposit it (see IRS deposit requirements or call us), and file your form 941 return quarterly.
Federal Income Tax Withholding (Also reported on form 941) - You must withhold the employee FIT based on their W4 exemptions and filing status and file your quarterly report. See Pub. 15 (Circular E) for detailed instructions.
Federal Unemployment (FUTA)- (Form 940) If less than $500 FUTA tax due in a quarter, report and pay once a year by Jan. 31st. If more than $500 due report and pay quarterly.
Also check with your state for information on State Unemployment Tax requirements.
Computing SUTA tax. Calculating what you owe in state unemployment taxes is simply a matter of multiplying the wages you pay each of your employees by your tax rate. However, every state limits the tax you must pay with respect to any one employee by specifying a maximum wage amount to which the tax applies. Once an employee’s wages for the calendar year exceed that maximum amount, your state tax liability with respect to that employee ends.
State unemployment tax rates are individually assigned to each employer each year, and every state uses an experience-rating system of some kind to determine an employer’s applicable tax rate for the year. Although these systems vary in how they’re actually administered, they share the goal of assigning lower tax rates to employers whose workers suffer the least involuntary unemployment and higher rates to employers whose workers suffer the most involuntary unemployment.
However, if you’re new to the system because you’ve only recently hired your first employees, you’ll pay tax at a fixed rate until you’ve contributed to the state’s unemployment compensation program for a specified period of time (generally one to three years, depending on the state) and established “experience” with your employees and unemployment. - www.toolkit.com
Check your state’s requirement with each state’s Department of Revenue: