The tax man is an equal opportunist when it comes to the size of your business. It is especially of concern for smaller businesses to have all of their taxes properly in line because a penalty can be quite costly. The IRS comes after and penalizes 4 out of every 10 small business owners. It may be a wise decision for a small to medium sized business to engage in payroll services.

Regardless if you are going to conduct payroll in-house or your business often will outsource its processes, it is good to know how things operate.

Payroll taxes are due either semi-weekly or monthly depending on the size of the payroll. The IRS will ultimately have a say of when they are due. Businesses that have a total payroll of $2,500 or less for the quarter will only need to file once every quarter.

Social Security

The Social Security Program was created so that payroll taxes withheld from employees at time of paychecks were given in increments back upon retirement. The rate of U.S. inflation has transcended the pace of Social Security, so that now it is not as beneficial to retirees as it once was projected to be.

Medicare

Medicare was engineered to help people over the age of sixty-five pay for medical costs. Many medications are not covered under this plan, but it is projected that Medicare aids nearly 98% of Americans over the age of sixty-five in some way with medical bills. The employer is also to match the amount withheld from each employee.

FICA

Money is withheld each paycheck from employees and is to be matched by their employer. Currently FICA is composed of 7.65% of the paycheck. Broken down further it is comprised of 6.2% for Social Security and 1.45% towards Medicare. The size of the payroll will determine the amount of time an employer has to pay FICA. The schedule is provided by the IRS and is largely contingent on the size of the company and payroll. Very small companies will only need to file quarterly while others will need to file three days after payroll is completed.

Employment taxes

Each business needs to withhold federal income taxes for every employee. Amounts withheld will vary depending on the number of withholding allowances claimed by the employee, the marital status of the employee, and any exemptions claimed by the employee.

Unemployment taxes

Unemployment benefits are offered to workers who are unemployed through no fault of their own and meet all the requirements. Businesses need to report federal unemployment taxes to the IRS. Unemployment taxes are not withheld from the unemployed, but are paid entirely by the business. The state unemployment tax rate is a percentage based on the total number of employees you have and the number of former employees collecting. If paying the full amount to the state, the federal government only requires you to pay .8% for up to $7,000 in income for each employee on payroll. The federal unemployment tax is 6.2% if you do not receive the maximum state credit.