Small establishments have responsibility in terms of withholding and paying various payroll taxes on behalf of their employees. Such taxes make contributions to government programs like Social Security, Medicare as well as unemployment benefits. Fully complying with the payroll tax obligations prevents unexpected penalty payments.
Key Payroll Taxes for Small Businesses
Small business owners should account for payroll taxes as listed below:
- Federal Income Tax: Establishments withhold federal income tax from employees’ wages in accordance with the IRS tax brackets alongside the information provided on the W-4 forms.
- FICA Taxes in Maryland (Social Security & Medicare): FICA requires both establishments and employees to contribute:
- Social Security Tax: 6.2% of wages. It is matched by the employer.
- Medicare Tax: 1.45% of wages. It is also matched by the employer.
- An additional 0.9% Medicare tax is applied to employees earning over $200,000 annually.
- Federal Unemployment Tax (FUTA): Businesses should pay 6% on the first $7,000 of each employee’s wages. The effective FUTA tax rate might be reduced to 0.6% in the case when state unemployment taxes (SUTA) are paid on time.
- Maryland Unemployment Tax (SUTA): Employers make contributions to state unemployment insurance programs. Rates change depending on the business’s history of layoffs as well as Maryland state-specific guidelines.
- State and Local Income Taxes: Some local jurisdictions in MD may have additional tax requirements.
Filing and Compliance Requirements for Payroll Taxes in Maryland
- Taxes Should Be Withheld Correctly: IRS tax tables and state withholding guidelines should be leveraged to deduct the correct amount from employee paychecks.
- Taxes Must Be Paid on Time: Federal payroll tax deposits are due monthly or semi-weekly in line with the size of the business.
- IRS Forms Should Be Filled: Form 941 (Quarterly Payroll Tax Return) for federal tax withholdings and Form 940 (Annual FUTA Tax Return) must be submitted for unemployment tax.
- Wages Must Be Reported to Employees: Employees must be provided with W-2 forms by January 31st each year.
Payroll Tax Compliance is Vital
Failure in withholding and remitting payroll taxes might result in IRS penalty amounts, interest fee charges as well as legal consequences. A payroll tax calculator in Maryland can be used for swift estimations.
Watter CPA presents professional payroll tax assistance to support small businesses—contact us today for expert support.
