It has been said that Americans make money together, spend it together and have to pay together as an explanation for the system of tax on income. A National Research Tax Project launched an audit (extending through 2012) of about 6,000 U.S. employers in an effort to claim $60 billion in uncollected withholding taxes. Citing the need to close an estimated $345-billion gap between taxes actually
. paid to the IRS and taxes still owed, the project was in full swing.Employers and self-employed persons have specific responsibilities regarding their payroll as required by Federal, state and local government agencies. Employers must withhold certain amounts from their employees' compensation to cover taxes on income for the various agencies, including Social Security, Medicare and unemployment to fund. Employers pay matching amounts. Reporting and depositing accurate payroll tax amounts to the appropriate agencies in a timely manner is vital to a business. Late or incorrect deposits may result in charges for interest and penalties.Tables and tax rates for Federal payroll withholding can change any time, based on laws made effective by the IRS. Each year, the IRS makes adjustments in the tables for inflation. As a progressive tax on income, the payroll withholding tax increases as income increases. Tax tables consider filing status (such as married, single or head of household), dependents and exemptions.Federal withholding tax liabilities for employers entail additional employee classifications, such as full-time employees, independent employees and contract workers. Other factors include employees' income, expense reimbursements, fringe benefits and compensation to owners. Certain fringe benefits are deductible by employers but, as excludable fringe benefits, they are not taxable to employees. In some cases, employers withhold more taxes than are required from an employee's income to pay the government. This entitles the employee to a refund. Payroll taxes are used to fund operations of the Federal government.Employers must file the Federal form 941 quarterly. Online payroll withholding tax calculators, pre-programmed with current tax tables, can ease the process of computing taxes.
