The Internal Revenue Service (IRS) has issued the new (percentage method) payroll withholding tables for 2018 along with notification that the W-4 Form is in the process of being updated to reflect the new tax law. For the moment, no new form is required and employers should retain the existing forms for all employees. In addition to recalculating the new payroll tax deduction, there are a several other changes for employers to consider. (more…)
At this particular moment in time, it doesn’t matter which side you fall on for the new Tax Cuts and Jobs Act passed in late December, 2017, it will have an impact on both your personal finances and your business’s financial situation.
The IRS can be tough when it comes to collecting payroll taxes. Businesses are required to withhold taxes from employee wages and pay these funds to the IRS. However, if the IRS doesn’t get this money, the penalties can mount up quickly. It doesn’t matter what your reason could be for not paying this money – even if it’s a good one. Not only will the IRS target the business owner, but they’ll also go after the check signer and any other person responsible for failing to pay the taxes. If you’re convicted, you could go to prison for up to five years. (more…)
Every year, as your small business files its taxes, your company is left with stacks of paperwork. You may shove it into a filing cabinet or a storage box. However, eventually, you may wonder: How long do I need to keep these tax records? (more…)
I was really excited for a colleague who got a big contract that was going to expand his company this year. He was excited because his small business would no longer be just a local business, but would now be a business that worked nation-wide. We celebrated with a congratulatory lunch. It wasn’t but a couple of weeks later that he called and was obviously down. I was afraid he’d lost the deal. But no, he said it was worse – it was about payroll taxes. (more…)
Every business, organization, and household needs a certain amount of money to keep things working. Small businesses sell their services and products for it. Charities fundraise for it. Individuals work for it. But what about governments? They can’t work, don’t have anything to sell, and have a hard time inspiring people to give to them. (more…)
A tax is a tax is a tax, right? Well, as anyone who has ever read a single paragraph of the state or federal tax code knows, there is rarely a simple answer to any tax-related question. If you’re a small business owner, you probably understand a little bit about the complexity of payroll taxes. Besides the responsibility of withholding federal taxes, small businesses must also withhold state and local taxes. As you will see, the rules governing county taxes alone can make you feel a little dizzy. (more…)
In the politically charged atmosphere during the couple of years preceding a presidential election, the topic of taxes – and payroll taxes in particular – takes center stage. It is payroll taxes that take a bite out of both employees’ paychecks and small business owners’ bottom lines. (more…)
One thing a small business owner never wants to hear in connection with his payroll is BACK PAY. Don’t be confused, Back Pay is not when you give an employee a raise and make the start date in the past and allow for retroactive pay. No, Back Pay is a remedy for wage violations. It’s an order that the employer make up the difference between what the employee was paid and what the employee should have been paid. It’s a serious situation. (more…)
Do you have employees who receive tips? Did you know, as an employer, you have certain obligations when it comes to the income on your employees’ tips? Do you – and your employees – know that they must report the total amount of taxable tips to you by the 10th of the month following the month after receiving the tips? If your employees don’t know this, you need to educate them.
Generally, your employee’s tips are not taxable unless they make more than $20 per calendar month. If they do make over $20 in tips per month, you’re responsible for withholding income and FICA (Social Security and Medicare) taxes on the employee’s reported tips (all tips, including the initial $20) – even though you don’t have control over the amount of tips your employee receives.
Also, you’re required to pay the employer’s portion of FICA and FUTA (federal unemployment) taxes on these tips. Additionally, you must withhold the 0.9% FICA Medicare surtax, too, if the employee’s tips (in combination with the wages you pay them) exceed the $200,000 withholding threshold.
However, your obligation to pay your employee’s portion of the FICA and income taxes due is limited to the amount of non-tip wages you pay the employee. If your employee’s paycheck isn’t big enough to cover the withholding taxes, you should withhold taxes in this order:
The employee’s portion of the FICA tax due on the non-tip wage payment.
The income taxes you’re obligated to withhold on the non-tip wage payment.
The employee’s portion of the FICA tax due on the tip income.
The income taxes you’re obligated to withhold on the tip income.
However, if this process still leaves you with insufficient funds to collect your employee’s FICA tax, your obligation to withhold the uncollected portion ends. As for collecting outstanding income taxes, these payroll taxes should be withheld from the employee’s next paycheck.
It’s important to note, if your employee doesn’t report their tips of $20 or more per calendar quarter to you, you can only be held liable for your portion of FICA. This liability only arises when the IRS makes a written notice, demanding payment.
Managing restaurant payroll and the payroll taxes can be complicated, but it doesn’t have to be if you have a payroll services provider like The Payroll Department handling your payroll and taxes for you. We can take the hassle out of figuring out what taxes you owe on the income from your employees’ tips and make these payments for you. Contact us for more information on how we can help you.