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Managing Social Security Taxes for Your BusinessIf you run a business in which you pay employees, you will need to withhold and match social security taxes. Social security is part of the Federal Insurance Contributions Act, also called FICA.By law, you must withhold a portion of each paycheck, for each of your employees. In addition, you must match the amount you withhold for each employee. If, for example, the social security tax rate is 12%, and one of your employees makes $3000 per month gross pay, each month you will withhold 6% of that employee's salary, which would be $180, and you will match that amount with another $180, equaling 6% of the employee's salary. There is a wage cap on withholding for social security, above which no further withholding is made on the salary of the individual for that year. The cap changes every year and can be referenced at the government's social security website. The social security tax that you withhold is just one of the taxes for which you are responsible, others include income tax and Medicare tax. All of these withholding taxes must be paid to the federal government on a regular basis, or you may be subject to a penalty. Instead of paying the withholdings directly to the government, in most cases you will pay via deposits made to an authorized depository, such as a commercial bank. Deposits will be made using a Federal Tax Deposit (FTD) coupon, which is a pre- printed deposit slip for your company that is distributed to you by the IRS. For small businesses, with total withholdings of less than $2,500 per quarter, no advance payment is required, and withholdings are reported and paid using the reporting Form 941. If your total deposit is less than $50,000 you will be required to make the withholdings deposit once a month. If it is over $50,000 you will make deposits every two weeks. For businesses with withholdings of more than $200,000, deposits must be made electronically. Like most accounting practices, the withholding and reporting of social security taxes can seem daunting when you are first preparing to implement the procedures. But you will find that the social security tax structure is easy to understand, and that the government has supplied a number of timesaving methods and ample support documentation on the web to help you comply with the requirements. INCORPORATE NOW!
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managing social security taxes for your business