Filing Small Business Taxes

 

As a small business owner with employees, you must withhold certain taxes from your employees’ wages. These include several local, state, and federal taxes.

Federal employment taxes include:

  • Federal income tax withholding
  • Social Security and Medicare taxes
  • Federal unemployment tax

Benefits that workers and families receive under the Federal Insurance Contributions Act are paid for by:

  • Social Security taxes
  • Medicare taxes

You withhold part of these taxes from your employees’ wages. You also pay a matching amount yourself.

The federal unemployment tax pays unemployment wages to workers who lose their jobs. You report and pay this tax separately from these taxes:

  • Social Security
  • Medicare
  • Withheld income

You pay federal unemployment tax only from your own funds. Employees don’t pay this tax or have it withheld from their pay.

Depositing taxes
You usually must deposit both of these via the Electronic Federal Tax Payment System (EFTPS):

  • Income tax withheld
  • The employer and employee Social Security and Medicare taxes

EFTPS is a tax payment system provided free by the U.S. Department of Treasury. It allows businesses to pay federal taxes electronically via the Internet or phone anytime.

Preparing and filing a W-2
At the end of the year, you must complete a W-2, which reports wages, tips, and other compensation paid to each employee. The form includes the employee’s:

  • Withheld income tax
  • Social Security and Medicare taxes

You must give a copy of this form to each employee by Jan. 31 of the year after the calendar year when you paid the wages.

You must also send a copy of the W-2 to the Social Security Administration (SSA). You summarize the W-2 using Form W-3. You should file these forms in a timely manner. This ensures that your employees have the correct Social Security amounts for retirement.

You can prepare and file up to 50 W-2s at a time, free of charge, at www.ssa.gov. Using SSA’s online W-2 filing, you can also print out all the copies of the W-2 for your employees, state taxing agencies, and others.

Due dates for filing the W-2s with the SSA are:

  • Paper forms — last day of February
  • E-file — March 31

Credits
You might be able to claim a credit for a portion of the wages you pay to an employee who’s one of these:

  • American Indian
  • Long-term family-assistance recipient

To learn more, see these tax tips:

Related Topics

Related Resources

Expenses For Self Employed

Learn more about expenses for the self-employed with advice from the tax experts at H&R Block.

A 5-Step Plan for Paying Off Debt When You’re Self-Employed

Are you facing debt as a self-employed person? Working for yourself may mean large investments and erratic income. Learn how to tackle the debt at H&R Block.

Families First Coronavirus Response Act (FFCRA) benefits small businesses and families

What is FFCRA? Learn what the Families First Coronavirus Response Act means for your small business with this advice from H&R Block’s tax and accounting experts.

What is the Economic Injury Disaster Loan and how can it help small businesses?

Economic Injury Disaster Loan availability has been expanded during the Coronavirus crisis. Find out from H&R Block how you can take advantage of the loan.