All businesses should know about their obligations for filing with local, state, and federal tax systems. Businesses with employees are required to withhold payroll taxes from employees’ paychecks. Calculating payroll taxes can be complicated. Here are some basic payroll tax components that businesses and owners should know:
- Federal Income Tax Withholding
Federal income tax withholding is withholding taxes from employee pay for federal income taxes owed by the employees. By completing Form W-4, the amount of federal income tax is determined. Employees can change this form anytime to update their information.
- Social Security and Medicare
These are also called FICA taxes (Federal Insurance Contributions Act), which is shared between employers and employees. The employer deducts the employee’s share, which is one-half the total due, from employee wages/salaries, and the employer pays the other half.
- Additional Medicare Tax
In 2013 as part of the Affordable Care Act, employers withhold 0.9% additional Medicare Tax on employees’ earnings that exceed a threshold. This medicare tax has no employer match.
- Federal Unemployment (FUTA) Tax:
FUTA is paid separately from the other taxes by the employer and isn’t withheld from employee pay.
- Self-Employment Tax
This is basically social security and medicare taxes for self-employed individuals.
Washington State does not impose a personal State income tax on employees. However, they do require State Unemployment and Paid Family Medical Leave to be paid to the Employment Security Department, and disability insurance to be paid through the Department of Labor and Industry.
Here are what employers in Washington State need to know:
Register as Employer
As an employer in Washington, you need to register with the Secretary of the State, and then file a new business license application through the Washington State Department of Revenue (DOR). After submission of application, Washington Department of Labor and Industries (for worker’s compensation) and Washington Employment Security Department (for Unemployment insurance) will notify and provide you the information you need to run your payroll, such as tax rates.
Payroll Tax Filing Requirements
Completed by Employee
|Form W-4 (IRS)||Employee information for the determination of federal income tax withholding|
|Form I-9 (USCIS)||Proof of an employee’s eligibility to work in the United State|
|New Hire Report (form to DSHS or Online report to Secure Access WA)||Report all newly and rehired employees within 20 days of hire|
|Electronic Federal Income Tax Payment System||System allows employer to set up schedule payment for taxes through online|
|Form 941 (Quarterly ) to IRS||Report Employee earnings, employer and employee Social Security and Medicare taxes, and Employee federal income taxes|
|Worker’s Compensation-L&I (Quarterly)||Workers’ compensation insurance for medical costs and wage replacement if injured on the j|
|WA State Unemployment Tax Report||Unemployment benefits for employees who lose their job|
|Paid Family and Medical Leave||Paid leave for employee to care for themselves or their family.|
|Form 940 (Annually)||Pays for administration of the federal unemployment insurance program|
|Form W-2 and W-3 (Annually)||Security Administration need for recordkeeping. IRS needs for reconciliation with Forms 940 & 941|
Quarterly report schedules:
1st Quarter – April 30
2nd Quarter – July 31
3rd Quarter – October 31
4th Quarter – January 31 the following year