Errors with your employment tax withholdings can lead to serious problems with the IRS, including the trust fund recovery penalty and the 4180 interview. If your business has employees, you’re required to withhold certain taxes, but not others. You’ll want to pay attention in this blog post as we go into further detail about employment tax withholdings.
In our previous blog posts, we’ve discussed the different paperwork requirements and tax responsibilities the IRS has for businesses that employ different kinds of employees. The two main types of employees are 1099 independent contractors and W-2 employees. In upcoming blog posts, we’ll also cover the different rules and requirements associated with hiring part time or seasonal help, as well as the different requirements a business has to consider when employing family members.
The world of employment taxes can be tricky! If you or your business have any issues with payroll taxes, employment taxes or need any business tax resolution services, don’t be afraid to ask for help. The team of trained business tax resolution specialists at Bullseye Tax Relief are here to help and offer a free initial consultation and transcript analysis for new clients!
Employment Taxes: Employment Withholdings
As of January 31st, 2021, according to the IRS Page Hiring Employees, in order for you “to know how much income tax to withhold from employees’ wages, you should have a Form W-4, Employee’s Withholding Certificate, on file for each employee. Ask all new employees to give you a signed Form W-4 when they start work. Make the form effective with the first wage payment. If employees claim exemption from income tax withholding, they must indicate this on their W-4. The amount of income tax withholding must be based on filing status and withholding adjustments as indicated on the form. If a new employee does not give you a completed Form W-4, withhold tax as if he or she is single. Additional withholding may be required on wages paid to non-resident aliens.”
Having new employees fill out Form W-4 is crucial because the exemptions the employee claims on this form dictate the taxes the employer is required to withhold. In addition to Form W-4, if you remember from our previous post, Business Taxes: Hiring W-2 Employees, employers are also required to have new employees fill out Form I-9, and in the process employers input information like the employee’s SSN into Form W-2.
The IRS Page Hiring Employees, as of January 31st, 2021, goes on to say that “a Form W-4 remains in effect until the employee gives you a new one. If employees claim exemption from income tax withholding, they must give you a new Form W-4 each year. If an employee gives you a Form W-4 that replaces an existing Form W-4, begin withholding no later than the start of the first payroll period ending on, or after the 30th day, from the date you received the replacement Form W-4. For exceptions and invalid Forms W-4, refer to Publication 15, (Circular E), Employer’s Tax Guide.”
All of these forms and dates can get a little confusing after a while. Feel free to bookmark this page so you can come back later if you ever have any questions! In the meantime, if you or your business need help with any employment tax issues, feel free to call Bullseye Tax Relief at (844) 582-3323 to find solutions!
Sources:
https://www.irs.gov/businesses/small-businesses-self-employed/hiring-employees