Key Terms
The key terms used in this section are listed below:
Payroll Liability is the difference between gross earnings and net pay. Each account is individually credited for the total amount shown on the payroll register.
Payroll taxes are the state and federal taxes employers are required to withhold and/or to pay on behalf of the employees.
FICA and Federal Income Taxes include both the withheld Social Security and Medicare taxes of employees as well as employer, and the Employees’ Federal Income Taxes.
State and Local Income Taxes should be paid by businesses at regular intervals. The state and local government determine the policies regarding the date and the mode of payment.
Federal Unemployment Taxes are paid quarterly. If the tax amount is less than $100.00, businesses are permitted to make a onetime annual payment for the full amount.
Forms W-2 and W-3: Form W-2 summarizes an employer’s earnings and withholdings for the calendar year. Form W-3 explains the information on Form W-2.
Forms 941 and 940: Form 941 is the employer’s quarterly Federal Tax return. It reports accumulated amounts of FICA and federal income taxes withheld from employees’ earnings, as well as FICA tax owed by the employer. The employer’s federal unemployment tax is reported annually on Form 940.