Q. Where do I send the Social Security, Medicare and Federal taxes that I take out of my employee paychecks?
A. There are two important concepts to understand about remitting your withholding dollars to the IRS.
- First is to pay attention to the frequency that you are required use when depositing. FICA, Medicare and Federal withholding taxes should be deposited according to the appropriate schedule assigned by the IRS. Employers with annual tax liability of less than $2,500 can report withholding amounts on Form 944 annually. Of course, to use that form you must be filing and paying in a timely fashion. Employers with more than $2,500 of annual tax liability would file a quarterly 941 return. Payments would be made based on a “Lookback Period” of the July 1 through June 30. Depending on your liability, you could be required to make federal deposits monthly, semi-weekly or daily schedule. All of this is discussed in Publication 15 in section 11, “Depositing Taxes.” Late payments create penalties and interest. Create a reminder in your calendar if necessary so you don’t forget your assigned schedule.
- The second part of depositing your withholding is to use the correct method. By far, the easiest way to make your deposits is through EFTPS system. If you utilize a payroll service provider, you are probably already signed up to have taxes paid in this manner. The service provider will take the money from the specified bank account and send to the IRS for you. Ultimately, remember that you are responsible for paying the taxes. If there is some kind of problem and your money never makes it to the IRS, you’ll to fix it, not the service provider.
If you are a self-employed individual and are attempting to make estimated payments for your own tax liability, then you can use a 1040 ES form available on the IRS website and send it to the appropriate address on page 6 of the instructions. You also can use the EFTPS system and pay with ACH or your credit/debit card. EFTPS keeps a record of your payments that you can give to your accountant at tax time for proof of payment.
This all seems complicated, but if you have a payroll service provider to prompt you, it is a very easy process to follow.