Services
Audit & Assurance
External, internal and joint venture audit services
Business Advisory
Management accounts, strategic planning, profit improvement, ESG
Corporate Finance
M&A advisory, selling a business, fundraising, valuations, due diligence
ESG
Baseline assessments, materiality assessments, carbon footprint and sustainability reporting
Hotel Accounting
Accounting function, automation, daily reconciliations and dashboards, accounts payable
Payroll & Employment
Payroll, global mobility, employee benefits, employment taxes
Private Clients & High Net Worth Individuals
Tax planning & compliance, tax residence and domicile, trust planning
Restructuring & Recovery
Business rescue, liquidations, administrations, insolvency, debt recovery
Tax
Corporate tax, customs duty, VAT, R&D, tax investigations, international tax
Virtual Finance
Bespoke service providing real-time information about your business performance
More from AAB
AAB PEOPLE
Full-service people consultancy – human resources, learning and development
AAB WEALTH
Financial planning, cash flow modelling, retirement planning
AAB Consulting
Business consultancy helping organisations with the challenge of change
Sectors
Business Services
Professional services, medical, recruitment and media
Construction & Property
Property developers, construction companies, housebuilders, landlords
Energy
Renewables, clean energy, energy producers, energy transition, exploration and production
Family Business
Specialist support for businesses owned/managed by families
Food & Drink
Food & drink producers, processors, importers, wholesalers and retailers
Industrial
Engineering, manufacturing, aerospace, automotive, shipping, distribution
Leisure, Retail and Hospitality
Fashion, entertainment, activity centres, hoteliers
Not For Profit
Charities, social housing, higher and further education institutions
Public Sector
Government, non-departmental public bodies, health boards, ALEOS
Technology
Software companies, tech start-ups, cybersecurity firms, and AI innovators.
About
AABout Us
Our story
Our Team
Meet the specialists
Careers
Join the AAB team
Diversity & Inclusion
Building a business where everyone feels they belong
Growing Sustainably - ESG
ESG – Our commitment to building a sustainable business
News
Latest news from across AAB Group
AABIE
AAB charitable initiative
Latest deal boosts AAB Wealth assets under advice beyond £1 billion
Insights
Blogs
Stay informed with cutting-edge news for business growth. Our experts offer industry insights and invaluable advice on accountancy and business strategies.
Case studies
Explore insightful case studies tailored to specific industries, offering invaluable lessons and strategies for success.
Webinars & Events
Engage with dynamic webinars and events tailored to your interests, offering valuable insights and networking opportunities.
ESG Diligence: The Key To Sustainable M&A Transactions
AAB / Blog / Understanding employment taxes in the US
BLOG9th Apr 2024
By Scott VerStrat
or reach out to a member of our Payroll & Employment team.
Considering how relevant they are in our day-to-day lives, employment taxes can be very complicated to understand. As the employer, it’s your job to deposit and report employment taxes and prepare and file Form W-2. This is used to report wages, tips and other compensation paid to your employees. In this blog, AAB Payroll Inc will focus on what you need to know about employment taxes in the US. We’ve also included links to some IRS articles and forms that you might find useful too.
Employment taxes include Federal Income Tax, Social Security and Medicare taxes, and Federal Unemployment Tax Act (FUTA) taxes.
Firstly, we’ll look at the major taxes you will likely have to withhold.
The first major tax withholding you will have to enforce is the Federal Income Tax. Use Form W-4 and either the Wage Bracket Method or Percentage Method withholding tables to figure out how much tax you’ll need to withhold. Once that is done, you will have to deposit the withholdings. The method of doing this will vary depending on your business and the amount withheld. We’ll look at depositing taxes later in this blog.
These taxes are also important to withhold from your employee’s wages, only this time you will have to pay a matching amount yourself. To figure out how much tax that is, use following IRS guidance: Your tax responsibilities as an employer and Specialized and detailed employment tax information. You’ll also have to follow the requirements for depositing these withheld wages, as discussed below.
Federal Unemployment taxes are reported by employers separately from the taxes listed so far. Employees do not pay this tax or have it withheld from their taxes; instead, you pay FUTA directly from your own funds.
There are two deposit schedules you may be required to follow: monthly and fortnightly. You must determine which schedule you have to file before the beginning of each calendar year. This can be done by reviewing Publication 15 for Forms 941, 944 and 945, or Publication 51 for Form 943. Failing to make a timely deposit can subject you to a failure-to-deposit penalty of up to 15 percent, so make sure you’re fully aware of your deadlines.
You are required to make deposits for FUTA Tax (using Form 940) for the quarter within which the tax due exceeds $500. The deposit must then be made by the end of the month following the end of the quarter. All federal tax deposits must be made using electronic funds transfer (EFTPS).
It is the employer’s responsibility to report employment taxes, using the correct method as determined by the IRS. For Federal Income Tax, Social Security and Medicare Tax, employers must file Form 941 each quarter or Form 943 (Agriculture) or Form 944 (New Employer) annually. This includes withholdings on sick pay and supplemental unemployment benefits. FUTA taxes, which again only the employer pays, are reported by filing Form 940.
It’s important that employers file all the necessary reporting forms on time, to avoid the failure-to-deposit penalty. See the IRS Employment Tax Due Dates page for filing and depositing due dates.
If you don’t know whether you’re meeting all the necessary US employment tax requirements, our team, based in Grand Rapids, Michigan, can help. We can take care of all your payroll needs, freeing up time for you to focus on running your business, and removing the burden of tax compliance. To see how our payroll software can be of benefit to your organisation, arrange a free, no-obligation payroll software demo, or speak to our expert payroll team today.
How AAB can help you with
Accurate, efficient handling of payroll functions and employment tax are fundamental to your success. We help you get them right – easing your workload, ensuring compliance in the UK and globally, and keeping your employees satisfied. Our comprehensive services for payroll and employment taxes address all these issues and help you operate efficiently, confidently and compliantly. Whatever the size of your business, from start-up to global player, all the services you require from us will be tailored to your specific needs and integrated to provide seamless support.
Related services
US Payroll Tax Manager