To register for a FEIN, apply online with the IRS. The form you will use is SS-4. [1] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source Call your state department of revenue to get information about applying for your state tax ID number. If you fail to obtain these identification numbers, you may be assessed fines when you report withholding information. [2] X Research source
Once each employee fills out Form I-9, you are required to keep it on file for a period of three years. If the IRS requests a copy, you are required to furnish one. [4] X Research source
Ask each employee to fill out a W-4 upon hiring them. Keep all of them on file as you may be required to submit copies to the IRS upon request. If an employee does not submit a W-4, withhold tax as if they are single with zero withholding allowances. [7] X Research source
For example, assume you employ two people. One person is considered an independent contractor under federal law (i. e. , not an employee) and gets paid with food and lodging. The second person you employ gets paid in money every other week for services they provide at your direction (i. e. , they are an employee). In this scenario, only the second person’s wages are subject to federal and state income tax withholding.
For example, if your only employee gets paid every other week, their pay period will be a two week window. Assuming they are a resident of the state you conduct business and pay taxes in, you should include all forms of wages in the calculation. Assume your employee gets paid $1,200 per pay period in money as well as $800 per pay period in lodging expenses. This employee’s total wages would equal $2,000 per pay period.
For example, assume you are in a state that accepts the federal W-4, and that is the only withholding form you have on file for your employee. Assume your employee has a marital status of “single” and takes a total number of allowances equaling four.
For example, in Minnesota, there are multiple tables and you will use the one that corresponds to your employee’s marital status pay period. If the employee is single and gets paid twice a month, you will use the Minnesota table that corresponds to that information. When you find that table, you will locate the intersection between the total number of allowances your employee takes and the total wages they make. The number you land on will be the amount you withhold. If your employee takes four withholding allowances and makes $2,000 every two weeks, you will withhold $75 for state income tax. [11] X Research source
For example, assume your only employee claims four allowances on their W-4, they are single, and they are paid $2,000 in total wages every other week. One allowance, according to the IRS table, is $168. 80. When you multiply this number by four, you get $675. 20. Next, when you subtract $675. 20 from $2,000, you get $1,324. 80, which is the amount subject to federal income tax withholding. Using IRS Publication 15, you will then find the table that corresponds to a single person who gets paid biweekly. Next, find the wage range that corresponds to your employee’s wage, after subtracting your allowances, and calculate the tax based on your findings. In this instance, you would withhold $167. 87 from your employee’s paycheck. [12] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source
For example, assume you paid your only employee a $2,000 bonus (on top of their total wages) in a single pay period. In this instance, you would withhold an extra $125 ($2,000 x . 0625) in addition to the state and federal income tax you have already withheld.
For example, if your employee’s total wages are $2,000, you would be required to withhold $124 for social security taxes ($2,000 x . 062) and $29 ($2,000 x . 0145) for Medicare taxes.
Flat fees can range from $20 to $100 depending on the services they are performing for you. The per employee charge usually ranges from $1 to $10. [17] X Research source
The amount you report is the total federal income, Medicare, and social security tax you withheld from every employee you have combined. [18] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source Your state deposit schedule will usually coincide with your federal schedule. Therefore, if you deposit monthly with the IRS, you will also deposit monthly with your state department of revenue. [19] X Research source
Be sure you deposit your funds in a timely manner or you may be subjected to late fees. In Minnesota, if you are late depositing your funds, you will be required to pay a 5% penalty on the entire sum of your deposit due. [20] X Research source
The IRS requires you to file quarterly returns unless they notify you otherwise or unless a federal exception applies. The exceptions apply to agricultural employers, seasonal employers, household employers, or employers reporting wages for employees living in territories of the United States. [22] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source A state like Minnesota also requires quarterly employer tax returns unless your filings are for minimal amounts ($500 or less). [23] X Research source
If you file annually, you will need IRS Form 944 instead of Form 941. [26] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source
Your employer identification number The number of employees you have The wages you paid The taxes withheld Your usual deposit schedule
Some state returns must be filed electronically or over the phone. Other states will allow paper submissions. For example, in Minnesota, employer returns must be filed electronically or over the phone. [31] X Research source
Form W-2 can be found on the IRS website. [34] X Trustworthy Source Internal Revenue Service U. S. government agency in charge of managing the Federal Tax Code Go to source
