Payroll tax remittances are an important, but often misunderstood, element of being an employer. What should you know about these mandatory taxes as you hire your first employees? Here are the who, what, where, when, why, and how of remitting tax obligations. 

Who? Payroll taxes are paid by the company, but they comprise a mixture of employee-paid taxes and company-paid taxes. Payroll taxes are not due for independent contractors or subcontractors. However, don't try to skip payroll tax obligations by classifying employees as contractors. If caught, the employer faces audits, stiff fines, and back taxes. 

What? Every employer must calculate three types of federal payroll taxes: Social Security, Medicare, and unemployment insurance. In addition, you will generally have state taxes, such as state unemployment insurance. Finally, the employer needs to withhold income taxes as requested by employees and remit these. 

Where? Payroll taxes are withheld from employee checks (when applicable) and kept in a holding account in your books (usually called Payroll Tax Due). At regular intervals, the employer will fill out a payroll tax form — like IRS Form 941 — to calculate the amount due and then pay it from these holding accounts. Instructions are included in each form as to where to send the check or make electronic remittance. 

When? Due dates vary, but it's vital that each employer learn them and meet them. Penalties for missing a deadline begin swiftly and rise the longer the taxes remain unpaid. This cost comes directly from your budget, even when the tax due is employee-paid. You could also end up with an unwanted audit by various oversight agencies. 

Why? Payroll taxes aren't fun, but they are vital to maintain a healthy workforce. Unemployment insurance and Social Security funds provide for employees if they can't work for you any longer. Remitting periodic taxes ensures that neither the company nor employees are left with a crippling tax bill at the end of the year. And a good reputation for managing payroll responsibilities helps attract and keep good workers. 

How? Because tax remittances involve multiple tasks and are unfamiliar to new employers, you do well to get help setting up a system. An experienced payroll service is invaluable, as these have systems already in place. Payroll services can provide full-service help from calculating taxes to writing checks, or you may opt only to get help filling out forms and receiving deadline reminders. 

Want to Know More? Learn all the ins and outs of your payroll tax obligations by meeting with a payroll service in your state today. With them on your payroll team, you'll easily understand and conquer the who, what, why, when, where, and how of all your employer roles.