Understanding Employment TAXES

Employers are required by law to withhold federal income and Federal Insurance Contributions Act (FICA) taxes, which include social security and Medicare taxes, from employee wages and pay the withheld taxes over to the Internal Revenue Service. The amounts withheld are commonly referred to as “trust fund taxes” because the employee’s income and FICA taxes are said to be held in trust by the employer for the United States. These taxes, together with the employer's required FICA tax contributions, are commonly called employment taxes.

Employers are required to periodically deposit their employment taxes in a federal depository (on a monthly or semi-weekly basis) AND report their employment tax liability quarterly to the IRS by filing a tax return.

Reporting Employment Taxes

Employers are required to report employment taxes quarterly to the IRS by filing Form 941 (Employer’s Quarterly Federal Tax Return). The reporting deadlines are as follows:

  • April 30th (for the period January 1st through March 31st);

  • July 31st (for the period April 1st through June 30th);

  • October 31st (for the period July 1st through September 30th); and

  • January 31st (for the period October 1st through December 31st).

If you timely deposited all taxes when due (as explained below), then you have an additional 10 days past the due date to file Form 941.

 

Depositing Employment Taxes

An employer is required by law to make periodic deposits of employment taxes in an appropriate federal depository in accordance with federal tax deposit laws and regulations. There are two deposit schedules: monthly and semi-weekly. Before the beginning of each calendar year, you must determine which of the two deposit schedules you’re required to use. Generally, if you paid more than $50,000 total in employment taxes from July 1, 2018 through June 30, 2019, then you probably fall within the semi-weekly deposit requirement. Review the deposit tables on pages 25 through 29 in IRS Publication 15 (Employer's Tax Guide). Note, however, you do not need to make employment tax deposits if your total tax liability for a given quarter is less than $2,500; you may pay the liability at the time you file your Form 941.

Liability for Failing to Pay

The persons responsible for collecting, accounting for, and paying over trust fund taxes withheld from employees’ wages, who willfully fail to do so, will be liable for a penalty in the amount of tax withheld but not paid over.

For more information, see IRS Publication 15 (Employer's Tax Guide).

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