I work as a General Building Contractor in California. And I would like to hire you if you’re a skilled worker. But if I do, I could go to jail.
The IRS can imprison or levy Payroll Tax Penalties and take collection actions against employers and their personal assets if unpaid ‘trust fund recovery penalties’ or ‘employment taxes’ themselves – cannot be immediately collected .
How hard is it to calculate and pay the Payroll Taxes?
There are quite a few things to pay, track and file for Social Security, Unemployment, FICA, Disability, Hospital Insurance, IRS and the Due Dates, forms, programs and amounts vary and change.
Here are just a few examples:
The Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010 – reduced Social Security withholding from 6.2 to 4.2 percent for 2011. It may be extended. Maybe not.
*Failure to pay correct & timely amount results in civil – criminal penalties.
The Wage base for computing the Social Security Tax OASDI increases in 2012 to $ 110,000 from $ 106,800.
The Federal Insurance Contributions Act (FICA) imposes -2- taxes on employers, employees and the self employed. Employer pays Half. 50 %
1. Old Age, Survivors – Disability Insurance – the Social Security Tax.
2. Hospital Insurance (Medicare Tax or HI)
OASDI maximum is $ 110,100 but there is No maximum on HI *Failure to pay correct & timely amount results in civil – criminal penalties
Plus the employer is also responsible for:
Federal Unemployment UE Tax FUTA. FUTA rate is now 6 percent on the first $ 7,500 of wages. May Change. State UE Tax – Varies, based on location &; number of employees *Failure to pay correct & timely amount results in civil – criminal penalties
Supplemental Wages, Commissions, draws, signing bonuses, severance pay, vacation and sick pay, all pay tax at ‘different rates.’
Since 1/1/11 IRS requires all federal tax deposits be Electronic. IRS e-file system includes forms 94x, 940, 941, and 944. But Payments by US Mail will be returned. If payments are then late, penalties will apply.
In the event of errors, Employers must file IRS Form 13460. But Form 13460 is NOT available from the IRS electronically.
Each Quarter – IRS Forms must be filed promptly with correct Tax. By February 28 – Social Security Forms W-2, 1099R, W-3 must be filed.
By January 31 every employee must receive Form W-2. Before I hire anyone, I need to hire a Payroll Processor. If the payroll processor makes a mistake, I am still the ‘responsible party.’
As a small business, Do I really want to hire anyone?