Small Business, Self-Employed, Other Business:
Forms 941, 940, Employment Taxes
We are about to hire employees and need to know how much tax to
take out and where to send this money?
You will need to secure a completed Form W-4 (PDF), Employee's
Withholding Allowance Certificate, from each employee. You will need Publication 15, Circular E, Employer's Tax Guide, and Publication 15-A (PDF), Employer's Supplemental Tax Guide, to determine
the amount of withholding and for directions on depositing the withholding
amounts and other employment taxes.
Generally, employers will quarterly file Form 941 (PDF), Employer's Quarterly Federal Tax Return, and annually
file Form 940 (PDF), Employer's Annual Federal
Unemployment Tax Return (FUTA), and Form W-2 (PDF), Wage
and Tax Statement, with Form W-3 (PDF), Transmittal
of Income and Tax Statements.
If a new employee has reached the limit for social security wage
base with a previous employer in the same year, does the new employer need
to withhold FICA taxes on wages paid for both the company and employee?
Yes, the social security wages base limit is applied to each separate employer.
The individual employee is subject to social security taxes up to the maximum
amount from each employer. As a result of an employee working for two or more
employers in the same year, social security tax in excess of the maximum wage
base may be withheld from his or her pay. An employee can claim the excess
of social security tax withheld from pay resulting from working for two or
more employers as a credit against the employee's income tax when filing Form 1040 (PDF), U.S. Individual Income Tax Return. However,
there is no provision for an employer to get a credit for the employer portion
of social security tax paid in this situation. There is no wage limit on the
Hospital Insurance tax.
We hired a nanny to look after our baby while we work. How do we
pay her social security taxes and properly report her income?
A nanny is considered a household employee. A household employer only has
to pay social security and Medicare tax only for the employee(s) that receive
cash wages that exceed the threshold amount for the year. If the amount paid
is less than the threshold, no social security or Medicare tax is owed. If
social security and Medicare tax must be paid, you will need to file Form
1040, Schedule H, Household Employment Taxes. You must withhold the employee's
portion of the social security and Medicare unless the employer chooses to
pay both the employee's share and the employer's share.
The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's
share is 7.65%. You may also be responsible for paying federal unemployment
taxes. For directions on household employees, refer to Publication 926, Household
Employer's Tax Guide.
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