Federal Level
Wage Withholding
You must withhold federal income tax from the taxable wages paid to your employees. You will need to obtain from each employee a properly executed Employee Withholding Allowance Certificate (IRS Form W-4). Before January 31, following the close of each calendar year, you must provided each employee with an annual Wage and Tax Statement (IRS Form W-2).
Social Security Taxes (FICA)
Social security taxes are imposed on both employers and employees. You must withhold FICA taxes from each employee’s wages and pay a tax equal to the amount paid by each employee.
Federal Unemployment Tax (FUTA)
Although a few exceptions exist, nearly all employers are subject to the federal unemployment tax. This tax is imposed on the employer, not on the employee.
Return and Deposit of Taxes
With some exceptions, employers subject to either income tax withholding or social security taxes must file a quarterly return on federal Form 941 and must deposit the income tax withheld and the FICA taxes with an authorized commercial bank depositary or a Federal Reserve Bank or branch.
California State Level
Wage Withholding
As a California employer, the corporation must withhold California income tax from the taxable wages paid to employees and must deposit these funds with the state. The process is similar to that for federal income taxes.
California Unemployment Insurance Tax
A California employer is generally subject to an unemployment insurance tax on the taxable wages paid to its employees. The corporation must register at the California Employment Development Department within 15 days after paying certain amount of taxable wages during a calendar quarter. This tax is imposed on the employer, not on the employees. See Employer’s Tax Guide: Unemployment Insurance Code of California, available from the California Employment Development Department.
California Disability Insurance Tax
A California employer is generally subject to an unemployment insurance tax on the taxable wages paid to its employees. The corporation must register at the California Employment Development Department within 15 days after paying certain amount of taxable wages during a calendar quarter. This tax is imposed on the employer, not on the employees. See Employer’s Tax Guide: Unemployment Insurance Code of California, available from the California Employment Development Department.
City Payroll Tax
A California employer is generally subject to an unemployment insurance tax on the taxable wages paid to its employees. The corporation must register at the California Employment Development Department within 15 days after paying certain amount of taxable wages during a calendar quarter. This tax is imposed on the employer, not on the employees. See Employer’s Tax Guide: Unemployment Insurance Code of California, available from the California Employment Development Department.
General Condition
The corporation’s responsibilities to pay employment taxes, to withhold taxes imposed on its employees, to file tax returns, and to make periodic tax deposits are substantial. Penalties for noncompliance can be severe: corporate officials charged with tax-withholding responsibilities may be personally liable for 100 percent of the unpaid taxes and also for any tax penalties if the neglect their responsibilities. If you have not already done so, we suggest that you consult your accountant promptly to develop proper tax accounting procedures so that timely tax payments are made.