11 – Social Security, Medicare, and Employee Income Tax
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the employer's tax liability is the amount owed for:
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- employee withholdings (income, SS, and medicare tax) - employer share of SS and medicare taxes
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two ways to deposit payroll taxes
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- electronic deposit - with a tax deposit coupon
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The Electronic Federal Tax Payment System (EFTPS)
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- a system for electronically depositing employment taxes using a telephone or computer - can be used by any employer - must be used if annual tax deposits are over $200,000
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Federal Tax Deposit Coupon, Form 8109
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- a form in which the employer enters the tax deposit amount and makes a payment with check, money order, or cash. - can be used by anyone not required to use the EFTPS - the employer's name, tax ID number, and address are preprinted on the form.
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Form 8109-B
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- a coupon that is not preprinted - used when an employer is short on supply of Forms 8109 (typically new companies)
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the \"lookback period\"
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- a four-quarter period ending on June 30 of the preceding year - deposit schedules are based on the amount currently owed and the amount reported in this period
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form 941
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- the quarterly payroll tax return form - shows income taxes withheld, social security and medicare taxes due for the quarter, and tax deposits
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monthly deposit schedule rule
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- a rule that applies if the amount owed is $2,500 or more and the amount reported in the lookback period was $50,000 or less
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semiweekly deposit schedule rule
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- a rule that applies if the amount owed is $2,500 or more and the amount reported in the lookback period was more than $50,000 - deposits are due on either Wednesdays of Fridays, depending on the employer's payday.
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deposit due days under the semiweekly deposit schedule
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- If payday is a Wednesday, Thursday or Friday, the deposit is due on the following Wednesday. - If paday is a Sunday, Monday, or Tuesday, the deposit is due on the following Friday.
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due date for Form 941
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- the last day of the month following the end of each calendar quarter
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wage and tax statement, form W-2 (aka withholding statement)
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- preprinted government form that contains information about an employee's earnings and tax withholdings for the year.
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transmittal of wage and tax statements, form W-3
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- preprinted government form submitted with Forms W-2 to the Social Security Administration - reports the total social security wages, medicare wages, total social security tax withheld, total medicare tax withheld, total wages, tips and other compensation, total federal income tax withheld (and other info)
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unemployment compensation tax program (aka unemployment insurance program)
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- a program that provides unemployment conpensation through a tax levied on employers
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experience rating system (aka merit rating system)
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- a system that rewards an employer for maintaining steady employment conditions by reducing the firm's state unemployment tax rate - does not affect the federal unemployment tax rate, only reduces the state rate
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the two ways to make federal unemployment tax deposits
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- electronic deposits using EFTPS - Federal tax deposit coupon, Form 8109
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employer's annual federal unemployment tax return, Form 940 or 940-EZ
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- a preprinted government form used by the employer to report unemployment taxes for the calendar year
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when is an employer's form 940 due?
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- by Jan. 31 of the following year (extended to Feb. 10 if all deposits were made on time)
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instead of form 940, businesses can use form 940-EZ if:
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- they paid unemployment tax to only one state. - they paid unemployment tax to only one state - they paid all federal unemployment taxes by Jan. 31 of the following year. - all wages that were taxable for federal unemployment were also taxable for state unemployment
