FS#4: Earned Income Credit For Filing Your 2009 Tax Return
Payroll Taxes: FICA, Income, & Unemployment Taxes
When you pay wages to your employee, you are responsible for payroll taxes owed on those wages. Payroll taxes include:
1) Federal Insurance Contribution Act (FICA) Tax – FICA tax pays towards the Social Security and Medicare Programs. This tax is 15.3% of your employee’s wages. Half (7.65%) of the tax is paid by you as the employer, and the other half is paid from your employee’s wages.
2) Income Taxes – Your employee must pay tax on the income she earns. Any employee working in New York City must pay federal, New York State, and New York City income taxes.
3) Unemployment Taxes – These taxes are paid by you, not by your employees, to provide unemployment compensation for eligible workers.
As the employer, you must withhold (subtract) the following payroll taxes from your employee’s gross wages. You must pay these withholdings directly to the Internal Revenue Service (IRS) and New York State (NYS) on your employee’s behalf:
- Her share of the FICA tax (you must withhold 7.65% from her wages)
- Federal, State, and City income taxes
You must pay the following payroll taxes from your own money that you set aside. Do not withhold these taxes from your employee’s wages:
- Your half of FICA tax (you must set aside your own money to pay the other 7.65% of this tax)
- Federal Unemployment Tax (FUTA tax)
- NYS Unemployment Tax (NYS UI tax)
For small businesses, payroll taxes are generally paid quarterly during the calendar year, regardless of how often you pay wages to your employee. When you pay may depend on the amount you owe. See the other side for a table showing the calendar quarters in the year.
Withholding FICA and federal income taxes
Your employee must fill out and give to you IRS Form W-4 (also in Spanish), so that you can determine how much money to withhold from her wages for federal income tax. You need to know her marital status, and the number of allowances she claims. The FICA tax rate is the same regardless of your employee’s marital status and allowances.
The IRS has several methods to figure how much federal income tax to withhold. We suggest using the Combined Withholding Method, because it lets you figure out how much federal income tax and FICA tax to deduct at the same time.
Learn more about the Combined Withholding Method in IRS Publication 15-T at www.irs.gov, or call 1-800-TAX-FORM or 1-800-829-3676.
Paying FICA and federal income taxes
When and how you pay these taxes depends on how much you withhold and set aside. If you withhold and set aside less than $2,500 in FICA and federal income taxes during any quarter, you must use Forms 941 and 941-v to report and pay these taxes quarterly. Most providers will not owe $2,500 or more. If you do, then you must deposit your payment with an authorized bank instead of paying directly to the IRS.
You must complete Form 941 for each quarter when you paid wages that were subject to withholding of FICA and income taxes. See IRS Publication 15 for detailed instructions on completing Form 941 and paying FICA and federal income taxes.
How to set aside and pay FUTA tax
Generally, if you pay NYS UI tax, you will pay a lower rate of FUTA tax. The amount of FUTA tax you pay will be a percentage of the wages you paid to your employee. Every calendar quarter, you learn how much FUTA tax you owe by completing IRS Form 940.
If you owe less than $500 in FUTA tax during any calendar quarter, you do not have to pay yet. Carry the FUTA tax amount over to the next quarter, until you owe $500 or more.
When you reach $500, you must deposit your FUTA tax payment, along with a Federal Tax Deposit (FTD) Coupon, or Form 8109, at any authorized bank. The bank sends your payment to the IRS. Do not pay the IRS directly!
Your FTD coupon and FUTA tax payment are due by the last day of the month, after the calendar quarter in which you owe $500.00 or more. You should receive FTD Coupons after obtaining your federal Employer Identification Number, or EIN (For more on the EIN, see Child Care Employer Responsibilities Fact Sheet #2: When You Hire Employees for Your Family or Group Family Day Care Program). You can also order the coupons by calling 1-800-829-4933.
Withholding State and City income taxes
Like federal income tax withholding, you need to know your employee’s marital status, and the number of withholding allowances she claimed on her Form W-4 to determine her withholdings for State and City income taxes. If your employee claims a different number of allowances for her State and City income taxes, find those allowances on her Form IT-2104.
For more information on withholding State and City income taxes, refer to Publication NYS-50-T, the withholding tables for State and City income taxes at www.nystax.gov, or order the publication by calling 1-800-462-8100.
Paying State and City income taxes withheld
If you withhold less than $700 in State and City income taxes in a quarter, you report those taxes with Form NYS-45-MN (Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return). You receive Form NYS-45 after you register for a NYS Unemployment Insurance Employer Registration Number (ERN). (Learn more about the ERN from Fact Sheet #2: When You Hire Employees for Your Family or Group Family Day Care Program.)
If you withhold $700 or more in State and City income taxes in any quarter, report the amount withheld on Form NYS-1 (Return of Tax Withheld), not on Form NYS-45-MN.
The withheld income tax and Form NYS-45 must be sent by the last day of the month, after the quarter in which you withheld those income taxes.
See Publication NYS-50 and Form NYS-45-I for instructions to paying State and City income taxes.
How to set aside and pay the NYS UI tax
You will find out how much of your own money you must set aside for NYS UI tax when you use the same Form NYS-45-MN to report the State and City income taxes you withheld. The NYS UI tax rate is a percentage of the wages you paid, and the rate varies. If you have income tax withholdings to pay, then combine your NYS UI tax payment with the withholdings.
As with IRS Form 941, if you pay wages subject to income tax withholding for a given calendar quarter, you must complete Form NYS-45.
See Publication NYS-50 and Form NYS-45-I for detailed instructions on paying NYS UI tax.
Calendar Year Quarters
| If you withheld taxes during this period… | ...then you must pay the taxes by: |
| January 1 to March 31 | April 30 |
| April 1 to June 30 | July 31 |
| July 1 to September 30 | October 31 |
| October 1 to December 31 | January 31 |
