How Are Payroll Taxes Calculated and Managed
If a business relationship is classified as that of an employer-employee relationship, a business is responsible for calculating, withholding, matching, depositing, and filing distinct payroll taxes.
Calculating – Determine amount owed on behalf of employee and employer based upon current year tax tables and Circular E Withholding – Set aside tax dollars from employee’s paychecks to be allocated into various tax programs Matching – Employers must match the FICA (Social Security and Medicare) contributions of employees Depositing – Electronically deposit the withheld funds to the appropriate agencies based upon a schedule determined by the total dollars to be deposited Filing – Report the amounts being withheld and deposited to the appropriate agencies.
This schedule is often times different from the depositing schedule. Employers also become responsible for producing additional forms such as the W-2’s and a W3 when it has been determined that an employer-employee relationship is in place.