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FEDERAL TAXES


Introduction

If you are starting a new business it is worth researching the different kinds of federal taxes involved, so take a look at this section. Note: this section is meant to give general information, taxes are very complex and you need to consult with your accountant.
What is an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is a nine digit number (for example 12-3456789) that the IRS assigns to corporations, limited liability companies and other business entities for tax filling and reporting purposes. An EIN is used by businesses in order to pay taxes to the IRS, it is analogous to the social security number that individuals use to pay taxes. Every partnership, corporation and LLC must have an EIN. A sole proprietorship needs an EIN number if it employs one or more employees. You need an EIN in order to open a business bank account or if in order to setup a merchant account for the business.
1- Federal Payroll Taxes

Each of your employees must fill out a W-4 Form in order to calculate the right amount of taxes to be withheld from the employers wages and employee tax deduction . After making the withholding from the employees the money must be deposited at a bank which is authorized to accept such funds. Sole proprietorship and partnerships usually withdraw money from the business without the formality of withholdings, you are required to make estimated deposit of taxes.

At the end of each year, you must issue a W-2 Form to each of your employees. A W-2 Form shows the amount of wages paid to the employee throughout the year, as well as the amount of taxes withheld.

As an employer, you need to be concerned with following federal payroll taxes:
  • Federal Income Tax

    All employers are required to withhold a portion of the employee wages as employee federal income. The federal income tax is withheld from the employee wages once the wage is paid to the employees. Employers must deposit the withholdings on a periodic basis to the IRS.

  • Medicare Tax

    All employers are required to withhold a portion of the employee wages as employee Medicare tax. Medicare tax is withheld from the employees wages once the wage is paid to the employees. Employers must deposit the withholdings on a periodic basis to the IRS. Employers are required to match the Medicare contributions.

  • Social Security Tax

    All employers are required to withhold a portion of the employee wages as employee Federal Social Security. Medicare tax is withheld from the employees wages once the wage is paid to the employees. Employers must deposit the withholdings on a periodic basis to the IRS. Employers are required to match the Medicare contributions.

  • Unemployment Tax

    All employers are required to withhold a portion of the employee wages as employee Federal Unemployment Tax. Unemployment Tax, is withheld from the employee wages once the wage is paid to the employees. Employers must deposit the withholdings on a periodic basis to the IRS. You must pay the Federal Unemployment Tax if you have paid wages of $1,500 an any quarter, or if you have had at least one employee for twenty calendar weeks.

2- Corporate Federal Tax

This tax is paid by corporations on the income they generated before the money reaches the shareholders as dividend.
3- Other Federal Tax
  • Federal Excise Tax

      Excise taxes are imposed on certain activities or items like petroleum products, tobacco, alcohol and a host of other things.
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