Understanding State Payroll Tax Information

You know that every year you are responsible for filing income taxes, but did you ever stop to think of where the money goes once it leaves your pocket? The federal government disperses funds for national expenses. State payroll tax is designated for things that will improve the state in which you live. The term "payroll tax" generally refers to two kinds of taxes, employer payroll tax or employee taxes known as withholding. If an employer has a payroll tax problem, they may need the assistance of a tax attorney.

Legal Requirements as an Employer

In the U.S., every employer is required by law to withhold a portion of each employee's income. Also they are required to pay half of the employee's Social Security and half of the Medicare tax as well. The combined Social Security and Medicare tax added together forms the Federal Insurance Compensation Act (FICA) tax. This is why employer and employee are both required to pay state payroll tax. If your employer does not pay this tax, they will be subject to serious fines and penalties from the IRS. This lack of payment will result in a serious employer payroll tax problem and will require payroll tax help from a qualified tax attorney.

Responsibilities for Withholding

By law FICA tax must be withheld from an employee's paycheck. If an employer fails to do this, they will be subject to a Trust Fund Recovery Penalty from the IRS. This penalty is imposed on employers or individuals who have been determined to be responsible for the violation. The allotted penalty is one hundred percent of the federal or state payroll tax owed, in addition to multiple fines. The employer must pay a matching amount of FICA tax on each employee. If you own a small business and find yourself liable for failure to pay this tax, then you need a IRS tax attorney to help you resolve your employer payroll tax problem.

Business Compliance with IRS Withholding Regulations

There are several things employers must do to make sure they are in compliance with federal and state payroll tax laws. They are required by law to withhold a certain percentage of an employee's wages and to match that contribution. As of 2007, this rate was approximately 6.2 %, according to Social Security tax regulations. The Medicare tax rate was 1.45% of employee income. Again the employer is legally bound to pay a matching amount. This is information your tax attorney will know and can ensure that all these payroll requirements are followed. They can solve any possible payroll tax problem.

Federal and State Unemployment Tax (FUTA)

By law each employer must also pay federal and state payroll tax in order to provide a fund for unemployment compensation insurance for their workers. This is called Federal and State Unemployment Tax (FUTA). The income base for FUTA is $7000, with the employer being legally responsible for only the first $7000 being paid to an unemployed worker. Your IRS tax attorney will be very familiar with this information and can handle this issue as well, they can provide your small business with any kind of employer payroll tax help you need.

As long as you as a business owner continue to pay federal and state income tax, you have nothing to worry about. However, if for some reason you run into a payroll tax problem that hinders your ability to pay, you must get professional tax help.