Smart Solutions For Federal Tax Issues
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Payroll taxes as a primary responsibility of business management

On Behalf of | Oct 4, 2022 | Tax |

There are specific legal requirements for business owners in Texas, and one of the most fundamental responsibilities is assessing associate relationships with the company and deducting tax withholding based on that status. Businesses effectively have two types of associates. Some are actual employees under direct control of the company who will have their wages adjusted for tax deductions after each pay period. Others are typically independent contractors who commonly set their own schedule and are responsible for their own tax payments. Even though independent workers are structured as separate businesses, they have tax obligations in the same manner.

Federal taxes

Federal taxes are the primary deduction that business managers apply to earned income. Payroll taxes actually include more than earned income taxes. There are also deductions for Social Security and Medicare taxes. These deductions are listed as FICA deductions, per the Federal Insurance Contributions Act, and they are set forth by the IRS in a standard tax table based on total earned income levels. Employers must match the contributions of the employee under the FICA law, and self-employed company owners are liable for the entire amount.

Payment schedule

While employees are only required to file federal tax returns annually, businesses are required to remit payroll tax deductions throughout the year. These payments may be required bi-monthly, monthly, or quarterly, and they may be submitted online through the official IRS website portal.

Independent contractors who are the only employee of their company are still required to process their own income taxes through the IRS. However, independent contractor federal withholding should be paid quarterly based on estimates of how much profit self-employed workers will generate during the period. Payroll tax returns are still filed annually by independents with any excess quarterly payments being sent back to the contractor following the annual filing.