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Employment Taxes encompass various taxes that employers deduct from employees’ wages and submit to the government. These include federal income tax, Social Security tax, and Medicare tax. Employers may also withhold and remit state, local, and unemployment insurance taxes. Requirements vary based on jurisdiction and employment arrangement. Compliance is crucial to avoid penalties and legal issues.
Federal income tax is based on an individual’s income and filing status. Employers deduct the appropriate amount from employees’ pay and send it to the government. Social Security tax finances retirement, disability, and survivor benefits. Both employers and employees contribute a percentage of wages to Social Security. Currently, Social Security tax is 6.2% for both employees and employers. Resulting in a total tax rate of 12.4%. Medicare tax funds healthcare benefits for individuals aged 65 and above. Employers and employees both contribute a portion of wages to Medicare. Medicare tax rate is 1.45% for both employees and employers. However, if you are self-employed, you are responsible for paying both the employee and employer portions, resulting in a total Medicare tax rate of 2.9%.
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Form 940 is a tax form used by employers to report their annual Federal Unemployment Tax Act (FUTA) tax liability. FUTA tax is a federal tax that employers must pay to fund unemployment benefits for workers who have lost their jobs. The form is used to calculate the amount of FUTA tax owed and to reconcile any payments made throughout the year. It is typically filed annually by January 31st of the following year.
Form 941 is a quarterly tax form used by employers to report wages paid to employees and the amount of taxes withheld from their paychecks. It is also used to calculate the employer's portion of Social Security and Medicare taxes. The form is submitted to the Internal Revenue Service (IRS) on a quarterly basis. The Form 941 deadline is the last day of the month following the end of each calendar quarter. Therefore, the deadlines for filing Form 941 are as follows:
1. For the first quarter (January to March): April 30th
2. For the second quarter (April to June): July 31st
3. For the third quarter (July to September): October 31st
4. For the fourth quarter (October to December): January 31st of the following year
This form is used to report payments made to independent contractors and other non-employee compensation. It is typically filed by businesses that have paid $600 or more to a contractor during the year.
Employers must provide a Form W-2 to each employee by January 31 of the following year. This form reports the employee's wages, tips, and other compensation, as well as the taxes withheld.
Employers must submit a Form W-3, which summarizes the information from all the Forms W-2 they issued, to the Social Security Administration (SSA) by the end of February each year.
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