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Employment Taxes

Employment and Payroll Taxes

We’ve already discussed tax requirements for employers to some degree in a previous lesson. Any person who who is not self-employed, has a portion of their wages withheld for payroll taxes. This includes Social Security and Medicare, also known as payroll taxes, which are matched by you, the employer. As of 2010 the rate is set at 4.2% of wages paid. We also discussed how to file your quarterly and annual tax returns, and options available to you under the VCSP come up short.

Federal Unemployment Tax

When an employee loses his or her job at no fault of their own, they are eligible and probably will claim unemployment benefits. Employers are solely responsible for paying this one, and it’s paid separately from payroll taxes at 6%. FUTA is figured quarterly using the 940 form. After the employee has made $7,000 in taxable wages, you are no longer responsible for paying into this. Likewise, if an employee is paid less than $500, you do not have to pay the FUTA. You should also check the 940 form to see if you are eligible for up to a 5.4% credit against the FUTA if your state requires you to pay it’s own unemployment tax.


If you remember, employment taxes are both quarterly and yearly on either the 941 or 944 form. This can of course be done online, through the IRS’ Electronic Federal Tax Payment System. If you think your employment taxes will be less than $1,000 in a calendar year, you must first contact the IRS to request filing Form 944 rather than 941.

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