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.
|First||January 1st||March 31st||April 30th|
|Second||April 1st||June 30th||July 31st|
|Third||July 1st||September 30th||October 31st|
|Fourth||October 1st||December 31st||January 31st|
How do I submit tax payments?
Businesses should submit quarterly tax payments to the IRS electronically or by mail. The federal e-file system is the fastest and most secure way for businesses to make quarterly tax payments and maintain compliance.
Your payroll provider can assist your business in calculating and filing these tax payments.