Although you will be processing payroll using a software program, you must allow time to keep your records orderly and up-to-date. Your accountant can advise you to ensure that necessary records, procedures, and reports are properly recorded, reported, and retained. 12.1 Collecting and Withholding Tax Status Information As an employer, you must have all new employees fill out and sign form W-4 (Employee Withholding Allowance Certificate). This form contains all the information you need to properly compute taxes and mail out W-2 forms: name, social security number, address, marital status, and number of withholding allowances. In addition, your state may have a similar form on which employees specify withholding allowances for state income tax purposes. Your city or state may require additional forms to comply with state or local tax regulations. Be sure to talk with your accountant about all the requirements of your particular location. In addition, each employee, at the time of hire (first day of work), must fill out and sign a Form I-9 (Employment Eligibility Verification) and present documents that establish identity and employment eligibility. These forms should be kept in your employee’s confidential personnel file. 12.2 Collecting and Withh lding Tax Status I formatio Employers are required to withhold several taxes from employees’ wages: Federal Income Tax. Social Security and Medicare Tax. State Income Tax (where applicable). Local Income taxes (where applicable). Possibly other state or local taxes. Wages subject to withholding include commissions, hourly training pay, vacation pay, bonuses, and termination payments. 12.2.1 Federal Income Tax Withholding This amount must be withheld from the employee’s wages and paid directly to the federal government. 12.2.2 Social Security and Medicare Tax Withholding Social Security and Medicare Taxes withheld are computed by multiplying gross wages by percentages. See the Employer’s Tax Guide (Circular E) for current percentages. Marital status and withholding allowances have no effect on these taxes. (You will also pay an Employer Tax, which will match the amount withheld from the employee’s wages. This is covered below.)
MOLLY MAID General Operations Manual Copyright 2015, Molly Maid, Inc.
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