Do you pay your payroll taxes on time? In this article, we’ll define what payroll taxes are, what it means when they are unpaid, and the penalties for not paying payroll taxes on time. What are Unpaid Payroll Taxes? Payroll taxes are the federal and state taxes that an employer deducts from employees' wages. They are a subset of employment taxes that employers pay. When payroll taxes are “unpaid,” it means the employer neglects to pay them to the relevant tax authorities. Types of Payroll Taxes Employers need to pay many types of payroll taxes on behalf of their employees, including: Federal Income Tax Withholding: Employers have a legal obligation to subtract federal income taxes from employees' wages, which is determined by their W-4 forms and the IRS tax tables. Social Security and Medicare (FICA) Taxes: Employers have the obligation to subtract Social Security and Medicare taxes from employees' wages, along with making a matching contribution on behalf of their employees. State Income Tax Withholding: In states that have income tax, it is the duty of employers to subtract state income taxes from their employees' earnings and submit them to the state tax authority. What about FUTA? Related to payroll taxes is another type of employment tax – Federal Unemployment Tax (FUTA). Employers are required by law to contribute towards federal unemployment taxes, ensuring the availability of financial support for eligible workers during periods of unemployment. However, FUTA is not considered a payroll tax because it is not paid by employees nor is it deducted from their wages. Penalties for Unpaid Payroll Taxes Employers may face severe penalties and repercussions if they fail to pay their payroll taxes. The following consequences are associated with non-payment: Failure to Deposit Penalty: Employers who do not meet the deadline for depositing payroll taxes can incur fines that correspond to a percentage of the outstanding tax sum. The …
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