Demetrius J. Karos, Ltd. Tax Representation From A Former IRS Employee

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Payroll tax basics for employers

Payroll taxes are taxes that are withheld and paid by an employer on behalf of an employee. Failure to properly handle payroll taxes can result in serious consequences and potential penalties which is why it is important to be familiar with the requirements associated with payroll taxes.

Payroll taxes include federal income tax withholding, state income tax withholding, Social Security taxes, Medicare taxes and federal and state unemployment taxes. Taxes that are withheld and paid are based on the employee's compensation. Employers only withhold and pay payroll taxes on behalf of employees and not independent contractors they may engage to perform work for them. Generally, the amount of control and supervision the employer has over how and when the work is done determines whether or not the worker is considered an employee or independent contractor.

Employers are required to withhold payroll taxes for their employees, including federal and state income taxes. The amount of payroll taxes that are withheld depends on the amount of wages paid; the number of pay periods; the filing status of the employee; and the number of allowances claimed by the employee. Employees complete a form and accompanying worksheet and can claim fewer personal allowances but cannot claim more which could result in payroll taxes being underpaid and lead to underpayment penalties.

Unpaid payroll taxes can lead to negative consequences for employers who fail to properly pay payroll taxes withheld from employees and can lead to trouble with the IRS. As a result, employers need to know how to properly withhold payroll taxes, pay payroll taxes and also what to do if they are accused of failing to properly withhold and pay payroll taxes for their employees.

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