Employer Identification Number
An Employer Identification Number , also known as a Federal Tax Identification Number is a must-have for a business. Applying for an EIN can be done online for free using an interview style application offered by the IRS. Five Things to Know about the EIN is a video that helps explain why it is critical the IRS has accurate and current information related to EINs or business accounts.
It’s important a small business understand employment taxes such as federal income tax, Social Security and Medicare taxes as well as Federal Unemployment (FUTA) Tax. Employers must regularly report wages, tips and other compensation paid to an employee by filing the required form(s) to the IRS.
Most employers use Form 941, Employer’s Quarterly Federal Tax Return to report federal income tax withheld and both the employer and employee Social Security and Medicare taxes. The smallest employers (those whose annual liability for Social Security, Medicare and withheld federal income taxes is $1,000 or less) file Form 944, Employer’s Annual Federal Tax Return, and agricultural employers file Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees. Only the employer pays FUTA tax; it is not withheld from the employee’s wages. Employers report their FUTA taxes by filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.
If businesses compensate non-employees for services, or pay rent, commissions, the fees of attorneys and other professionals, or make certain other payments, businesses must obtain the Taxpayer Identification Number (TIN) of the payee before making the payment. If businesses don’t have the payee’s TIN at the time payment is made, businesses must withhold 24% from the payment as backup withholding. A payer is liable for backup withholding even if the tax is not deducted from the payment. Payers may use Form W-9 to request the payee’s TIN. Payers use Form 945, Annual Return of Withheld Income Tax, to report backup withholding.
There are two deposit schedules for employment taxes withheld and the employer’s match − monthly and semi-weekly. Before the beginning of each calendar year, employers must determine which of the two deposit schedules they’re required to use. To determine the businesses’ payment schedule, review Publication 15 for Forms 941, 944 and 945, or Publication 51 for Form 943. Deposits for FUTA Tax (Form 940) are required for the quarter within which the tax due exceeds $500. The tax must be deposited by the end of the month following the end of the quarter. Small business taxpayers must use electronic funds transfer (EFTPS) to make all federal tax deposits. See the Employment Tax Due Dates page for information on when deposits are due.