Why Should You Be Extremely Careful About Paying Correct Taxes On Time and Filing Correct Reports

Employers must pay federal payroll taxes to the government and file the appropriate reporting and informative reports.

Employers deduct payroll taxes from employees' paychecks and send them to the IRS. Employers must deduct the right amount of taxes from employees' paychecks.

You also need to add the taxes you must pay as an employer. For example, the worker only pays half of the Social Security tax; the employer pays the other half.

The employer is in charge of depositing the amount that was withheld. We look at the rules for paying and payroll taxes filing, as well as the benefits of paying taxes on time and with correct information. Learn more by reading our guide.

Understanding Payroll Tax Payment and Filing Requirements

Understanding payroll tax payment and filing requirements are crucial to any business. Proper payroll tax management requires:

• Paying and reporting federal and state taxes
• Reporting income, withholdings, and payments on behalf of employees and contractors
• Keeping federal and state records

Compliance is crucial to avoiding payroll tax penalties. Let's look at the requirements.

Income and FICA Taxes Deposit Due Dates

Your required schedule for submitting your federal tax deposit of income and FICA taxes depends on your employment tax obligation size.

The IRS tells you which schedule to use for the next year after each year. For example, your program may be yearly, quarterly, monthly, or biweekly.

Employers who make monthly federal tax payments must pay by the 15th of each month. If you pay semi-weekly, federal tax contributions are due within 2-3 days following paycheck, excluding weekends and holidays.

FUTA (Federal Unemployment) Tax Deposit Rules

You must submit FUTA tax contributions to the IRS at particular times. If your company owes more than $500 in FUTA Tax in any quarter, you must pay by the end of the following month.

If your tax liability is less than $500 in any quarter, you do not have to pay it until the accumulated amount reaches $500 or more. However, if your end-of-year unemployment tax liability is over $500, you must submit a deposit by January 31 or with Form 940.

Federal Payroll Return Requirements

Federal income tax is a wealth tax, which changes depending on how you file your taxes. This means that the tax rate goes up as your income goes up. The tax rates for each person can be anywhere from 10% to 37%.

Employers must also give employees and contractors W-2 and 1099 forms that show how much money was paid and taken out. There may also be state requirements.

Income and FICA Tax Return Requirements

FICA is a payroll tax employers withhold from employees' salaries and pay to the IRS (IRS). FICA tax is used to finance Medicare and Social Security using employee and employer contributions.

The employer pays the same portion of Medicare tax and Social Security tax as the employee.

FUTA (Federal Unemployment) Tax Return Rules

Employers pay FUTA, not employees. The FUTA wage base is the first $7,000 of an employee's total compensation. Gross pay exceeding $7,000 is not subject to FUTA tax. The introductory FUTA tax rate is 6%.

Form 940, or the Employer's Annual Federal Unemployment Tax Return, must be used to report FUTA tax and be submitted by January 31st of each year if the following criteria are met, such as if a business paid $1,500 or more to an employee(s) in any quarter of the current or preceding year. And, if in 20 plus weeks of the present or prior year, a company recruitedone1 or more people for any part of the day.

Is payroll a thorn in your side? Let us handle all the stress related to payroll so you don't have to...

Penalties that You Need to Keep on the Radar

If you ignore or completely disregard your tax payroll obligation, your business may face a penalty for failing to pay payroll taxes. 

The IRS assesses penalties based on the following factors:

• How much money do you owe
• How late your payment is

Missing a payroll tax deposit due date can mean more than penalties. Then there's interest. According to the IRS, interest can range from 3% to 6%.

The IRS may file a tax lien against your property if you don't pay your taxes.

If the IRS believes you're attempting to avoid paying taxes, you could even face jail time apart from a fine. Don't forget that late reports also incur additional fines.

However, the IRS may dismiss a penalty if you provide a good enough justification. Therefore, you must clarify why you think you have a valid excuse for not paying after getting an IRS notice.

Benefits of Paying Taxes on Time

Nobody wants the IRS to conduct a particular investigation into their affairs. To stay on their good side, be sure you don't owe them anything. By doing this, you benefit in the following ways:

Avoid Additional Interest and Penalties

Employment regulations are becoming more complex, and taxes make it more challenging to comply. In the fiscal year 2021, the Internal Revenue Service levied civil penalties totaling $37.3 billion.

There aren't any maybes, ands, or buts: you WILL be fined if you have outstanding payroll taxes. What if you are unable to make the entire payment? Pay what you can afford! Even a partial payroll tax payment will lower the fines you will incur.

Of course, the ideal situation is to pay on time and the total amount. It is the only safe option to avoid interest and penalties.

Foregoing Future Refunds

Many people may lose a tax refund because they failed to file a federal tax return. In addition, you  only have three years from the initial due date, usually in April, to seek your refunds under the legislation.

In most cases, they will not be penalized if they are owed a return. Any refunds are first used to repay any back taxes that are owed.

Protect Your Credit Rating

While tax payment has no direct impact on your credit ratings, using credit to pay your taxes can indirectly impact your credit. Also, avoiding payment of your taxes not only gets you into issues with the IRS but also jeopardizes your future ability to apply for credit.

If the IRS issues a Federal Tax Lien, it may restrict your ability to obtain credit. In business, property and rights to company assets, including accounts receivable, are subject to the lien.

Keep Your Business Squeaky Clean!

Ensure you're doing everything possible to remain compliant before your company gets harmed.

It is preferable to detect problems early, face up to them, and correct them now rather than wait for penalties and legal action. And, if you genuinely want to avoid costly payroll mistakes, consider the benefits of paying taxes and getting upfront before falling behind.

Are you experiencing headaches keeping up with timelines and payments of your payroll taxes? Then, contact us to schedule a free appointment! We take care of your payroll stress, so you don't have to.

Are you looking for more payroll processing information? Check out our Ultimate Guide to Payroll Processing.

Is payroll a thorn in your side? Let us handle all the stress related to payroll so you don't have to...