Payroll taxes are state and federal taxes paid by the employer and/or the employee and include Social Security, Medicare, FUTA (federal unemployment) and SUTA (state unemployment) taxes. While employees are also responsible for paying Social Security and Medicare, only the employer pays FUTA and SUTA taxes. There are steep penalties if payroll taxes aren't paid.
Deposits
Employers must submit their payroll taxes, other than FUTA and SUTA, to the federal government either monthly or semiweekly. Deposits can be made online via the Electronic Federal Tax Payment System (EFTPS) or via an authorized financial institution.
Penalties
If your deposit is late or less than the required amount, or you do not use EFTPS when instructed, you may face payroll tax penalties.
Late Penalties
For payments one to five days late, you will receive a penalty of 2 percent. For payments 6 to 15 days late, the penalty increases to 5 percent. For late payments over 15 days, a 10 percent penalty will apply.
Other Penalties
If you neglect to make your deposit via either of the two authorized payment methods, you will be assessed a 10 percent penalty. If the amounts remain unpaid, a 15 percent penalty may apply.
Bankruptcy
Filing for bankruptcy will not exempt you from paying your payroll taxes.
Considerations
Keep in mind that the most recent deposit will go toward any tax liability. This has the potential of creating a series of late payments. If you are behind in your payroll taxes, it is imperative that you speak with a financial consultant as soon as possible, as your business could be at risk.
