What are quarterly payroll taxes?

Every business with at least one employee is obligated to withhold and pay payroll taxes. These taxes are withheld for every employee during each pay period. However, while the taxes are withheld each pay period, typically they are not filed each pay period. Due to the fact that these withholdings are generally smaller amounts, they are sent to the Internal Revenue Service on a quarterly basis. Let’s take a more in-depth look at quarterly payroll taxes.

What are quarterly payroll taxes?

Quarterly payroll taxes are the taxes that a business is required to pay to the federal government if they expect to owe more than $1,000 in tax payments. If they expect to owe less than $1,000, businesses can file payroll taxes on a yearly basis. These payments are comprised of two things. First, the portion of employee wages that an employer must withhold from an employee’s paycheck to pay the tax liability on that employee’s behalf. Secondly, the amount that an employer is responsible for paying on each employee. These tax withholdings and employer payments cover the following items:

• Federal Income Tax
• State Income Tax (if applicable)
• Social Security Tax
• Medicare Tax
• Federal Unemployment Tax
• State Unemployment Tax

How do I calculate quarterly payments?

These payments are calculated using a few IRS tax forms. First, IRS Form 940, or the Employer’s Annual Federal Unemployment (FUTA) Tax Return, is used to calculate Federal Unemployment Taxes. While this form is due annually, the payments for Federal Unemployment Tax are due quarterly if your liability exceeds $500 for the year.

The other form, IRS Form 941, also called the Employer’s Quarterly Federal Tax Return, is due each quarter. This form is used by businesses to report the following items:

• Wages they have paid
• The tips their employees have reported
• The employee portion of federal income and FICA taxes withheld
• The employer portion of FICA taxes

In part 2 of Form 941, the tax liability for the employer is calculated as an estimated amount for that particular quarter. At year end, business must file an annual tax return to determine its’ exact tax liability. Depending on the amount paid in estimated quarterly taxes, businesses will either owe additional taxes at year end or receive a refund if they have overpaid.

Finally, each state has different requirements for how State Income Tax and State Unemployment Taxes are reported and when to submit payment. Be sure to check with your state for guidelines on filing State Income Tax and State Unemployment Taxes.

When are these payments due?

Each quarter, businesses must report and send their tax liability to the IRS. These payments are due no later than the last day of the month following the end of quarter. Additionally, should the last day of the month be a weekend or holiday, the payments are due by the following business day. The chart below provides due dates for each quarter.

How do I submit quarterly tax payments?

There are a few options when submitting tax payments to maintain compliance.

Electronically Through EFTPS: The most efficient and recommended method for businesses to submit their quarterly tax payments is electronically, using the Electronic Federal Tax Payment System (EFTPS). This system is not only quick but also secure, ensuring the confidentiality and safety of your business’s financial information. To use EFTPS, businesses need to enroll first, which can be done online at the EFTPS website. Once enrolled, you can schedule payments, view payment history, and receive instant confirmation for each transaction.

IRS Direct Pay: For smaller businesses or sole proprietors, another electronic option is the IRS Direct Pay system. This tool allows you to pay directly from your bank account without any fees. It’s a simple and straightforward process that can be used for various tax types, including estimated taxes.

By Mail: If electronic payment is not feasible, businesses can still make payments by mailing a check or money order to the IRS. It’s crucial to ensure that the payment is correctly addressed to the IRS and includes the necessary identifying information, like your business’s Employer Identification Number (EIN), the tax form number (for example, 1040-ES for estimated taxes), and the tax period for which the payment is made. This traditional method is slower and carries a slight risk of getting lost or delayed, so it’s advisable to send payments well ahead of the deadline.

Tips for timely and accurate quarterly tax payments

Here are a few tips to help your business stay timely and keep accurate payments.

• Set Calendar Reminders: Quarterly tax deadlines can sneak up quickly. Setting calendar reminders a few weeks in advance can help ensure you don’t miss a payment.
• Double-Check Information: Always double-check the details like EIN, tax period, and payment amount before submitting.
• Keep Records: After making a payment, either electronically or by mail, keep a record of the confirmation or proof of mailing. These records are crucial in case of any discrepancies or audits.

Your payroll provider can assist your business in calculating and filing these tax payments.  Contact our team here for help!