When you hire your first employee, you'll also need to register with the IRS and, perhaps, your state and local tax agencies. In addition to assigning you an employer identification number for use on all your correspondence, deposits, returns, and other documents, the tax agencies will usually supply you with information about your specific payroll tax obligations and with the forms you'll need to use when you deposit the taxes and file returns.
- Federal tax deposits and returns of course, your main task is to see that your taxes are paid and reported in a timely fashion to the appropriate tax agencies. For federal payroll taxes, this usually means depositing the taxes on at least a monthly basis and filing quarterly and annual returns.
- State tax deposits and returns for most state payroll taxes, you submit your payment with an accompanying return on a quarterly basis directly to the agency that administers the particular tax.
- Reporting obligations to employees your payroll tax obligations do not end with filing tax returns with the government. You also have reporting obligations to your employees and, in some cases, to your independent contractors.
- Recordkeeping requirements you must also maintain all records pertaining to the payroll taxes and wages you paid, for a specified period.
- Payroll tax penalties if you stay on top of your payroll tax obligations throughout the year, you're in the clear. However, if you were inattentive or simply made some mistakes along the way, you could be facing the threat of some rather unpleasant penalty assessments.