If you are a business owner, you have to pay employer federal taxes to the Internal Revenue Service (IRS) on behalf of your employees and yourself. Employer federal taxes are taxes that you withhold from your employee’s wages and pay to the government. They include income tax withholding, social security and Medicare taxes, and unemployment tax. These taxes help fund various government programs and services, such as national defense, health care, education, and social security. Paying employer federal taxes is not only your legal obligation but also your civic duty.
This article guides you step by step through the process of paying employer federal taxes correctly and efficiently and thus avoiding penalties and interest. You get to know what each step involves, and what forms and documents you need.
To make federal employer tax payments:
1. Obtain an EIN
2. File Tax Returns
3. Make Payments
Ready? Let’s go!
1. Obtain an EIN
The first step to paying employer federal taxes is to obtain an Employer Identification Number (EIN). An EIN is a nine-digit number that identifies your business to the IRS. You need an EIN to file tax returns and make payments for your business. You also need an EIN to open a bank account, apply for a loan, or hire employees for your business.
You can apply for an EIN in four ways: online, by phone, by fax, or by mail. The online method is the fastest and easiest way to get an EIN. You can use the IRS website to apply for an EIN online, 24 hours a day, seven days a week. You will need to provide some basic information about your business, such as its name, address, type, and purpose. You obtain your EIN immediately after completing the online application.
The phone method is another quick way to get an EIN. You can call the IRS toll-free number at 1-800-829-4933, Monday through Friday, from 7 a.m. to 10 p.m. local time. You need to answer some questions about your business, similar to the online application. You receive your EIN at the end of the phone call.
The fax method is a slower way to get an EIN. You can fax a completed Form SS-4, Application for Employer Identification Number, to the IRS fax number at 1-855-641-6935. You need to provide the same information as the online or phone application. You access your EIN within four business days after faxing the form.
The mail method is the slowest way to get an EIN. You can mail a completed Form SS-4 to the IRS address at Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999. Provide the same information as the online, phone, or fax application. You receive your EIN within four weeks after mailing the form.
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2. File Tax Returns
The second step to paying employer federal taxes is to file tax returns. Tax returns are forms and schedules that report the amount of taxes you owe or paid taxes by your business to the IRS. You need to file tax returns regularly, depending on the type and size of your business. Filing tax returns helps you keep track of your tax obligations and avoid underpaying or overpaying taxes.
The different required forms and schedules for different types of businesses and taxes are:
- Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return: This form shows your federal unemployment tax for state unemployment programs. If you paid at least $1,500 in salaries to your employees in any calendar quarter or had one or more employees for at least part of a day in 20 or more weeks in a year, you must file this form yearly by January 31.
- Form 941, Employer’s Quarterly Federal Tax Return: This form shows the income tax, social security, and Medicare taxes you withhold from employee paychecks and pay to the federal government. If you paid earnings subject to these taxes, you must file this form four times a year by the last day of the month after each quarter.
- Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees: This form is similar to Form 941, but it is for employers of farm workers. You need to file this form once a year, by January 31 of the following year, if you paid wages subject to these taxes to farm workers.
- Form 944, Employer’s Annual Federal Tax Return: This form is also similar to Form 941, but it is for small employers who have an annual liability of $1,000 or less for these taxes. You need to file this form once a year, by January 31 of the following year, if the IRS notified you that you qualify for this form.
- Form 945, Annual Return of Withheld Federal Income Tax: This form reports federal income tax withholding from nonpayroll payments such as pensions, annuities, gaming winnings, and backup withholding. If you make nonpayroll payments subject to these taxes, you must file this form annually by January 31.
- Form 1041, U.S. Income Tax Return for Estates and Trusts: This form reports the income, deductions, gains, losses, and taxes of estates and trusts. You need to file this form once a year, by the 15th day of the fourth month after the end of the tax year, if the estate or trust had any taxable income or gross income of $600 or more, or a beneficiary who is a nonresident alien.
- Form 1120, U.S. Corporation Income Tax Return: This form reports the income, deductions, credits, and taxes of corporations. You need to file this form once a year, by the 15th day of the fourth month after the end of the tax year, if the corporation had any taxable income or gross receipts of $500 or more, or was required to file a return by law or regulation.
- Form 1099-MISC, Miscellaneous Income: This form reports the payments that you make to nonemployees, such as independent contractors, consultants, attorneys, and landlords. You need to file this form with the IRS and send a copy to the recipient by January 31 of the following year, if you paid at least $600 in rents, services, prizes, awards, or other income to a nonemployee.
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3. Make Payments
The third and final step to paying employer federal taxes is to make payments. Payments are the actual money that you send to the IRS to settle your tax liability. Your tax liability is the amount of taxes that you owe to the government after subtracting any credits or deductions. You need to make payments on time and in full, to avoid penalties and interest.
You can make payments in four ways: electronic payment, check or money order, cash, or wire transfer. The electronic payment method is the most convenient and secure way to pay your taxes. You can use the IRS website or the Electronic Federal Tax Payment System (EFTPS) to make payments online, by phone, or by mobile device. You need to enroll in the EFTPS and provide your bank account information. Schedule your payments in advance or make them on the same day.
The check or money order method is another way to pay your taxes. You can mail a check or money order payable to the United States Treasury, along with a payment voucher, such as Form 940-V, Form 941-V, Form 943-V, Form 944-V, Form 945-V, or Form 1041-V. You need to write your EIN, tax period, and form number on the check or money order. You can also pay in person at some IRS offices or authorized retail partners.
The cash method is a way to pay your taxes in cash at a participating retail store. To do this, visit the IRS website and use the PayNearMe option to generate a payment code. Then take the code and your cash to the store and pay the cashier. You then receive a receipt as proof of payment. There is a limit of $1,000 per day and a fee of $3.99 per payment for this method.
The wire transfer method is a way to pay your taxes from your bank account to the IRS bank account. You will need to contact your bank and provide the IRS wire transfer information, such as the routing number, account number, and tax type code. You will also need to complete a same-day taxpayer worksheet and fax it to the IRS. There is a fee charged by your bank for this method.
Recap
There are three simple procedures to pay federal employer taxes: get an EIN, file your taxes, and pay. To accomplish this, you can pay your taxes online, over the phone, with a mobile device, or with cash using the EFTPS, the PayNearMe option, or the IRS website. The Internal Revenue Service (IRS) website also provides downloadable forms and instructions for filing tax returns.
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