Payroll Tax basis

If you have a specific question about your tax situation, please contact us.

Basic Federal Tax for Employers for 2014 Taxes

The social security tax rate is 6.2% each for the employee and employer, unchanged from 2013. The social security wage base limit is $117,000.

The Medicare tax rate is 1.45% for the employee and the employer, unchanged from 2013. There is no wage base limit for Medicare tax.

Additional Medicare Tax withholding. In addition to withholding Medicare tax at 1.45%, you must withhold a 0.9% additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year.

Outsourcing payroll duties. If employers use a third-party vendor, employers must ensure that their payroll vendor files their tax returns and deposits properly and on time. The employer remains responsible if the third party fails to perform any required action.

If you want to outsource your payroll administration, please contact us for recommendations on reliable third-party payroll service providers.

The IRS provides two options (monthly or semi-weekly) for making payroll tax deposits.

The IRS determines deposit schedule you must follow  based on the total tax liability you reported on form 941 during a look-back period. The look back period for a Form 941 filer who filed Form 944 in either 2012 or 2013 is the calendar year 2012.

Below is a listing of the relevant deposit Federal due date schedules for employers. State tax requirements are generally the same.

Monthly Deposit Schedule
You are a monthly schedule depositor for a calendar year if total taxes on Form 941, line 10, for four quarters in your look back period were $50,000 or less.

New employers: The IRS considers your tax liability for any quarter during look back period before you started or acquired your business to be zero. Therefore, you are a monthly schedule depositor for the first calendar year.

If you are a monthly depositor, make your Federal payments by the 15th of the following month.

Semi-weekly Deposit Schedule
You are a semi-weekly depositor for a calendar year if total taxes on Form 941, line 10, during the look back period were more than $50,000.

Semi-Weekly Filers

If your average tax liability is more than $1,000 per month, you will be assigned a semi-weekly filing status. Your payments will be due within three banking days if the abmount of tax withheld exceeds $500 on any federal cutoff date for semi-weekly withholding. Federal cutoff dates are generally on Tuesday and Friday of each week as shown in the information below.

If your liability exceeds $500 for a payday that falls on Wednesday, Thursday or Friday, make your semi-weekly payment no latter than the following Wednesday.

If your liability exceeds $500 for a payday that falls on Saturday, Sunday, Monday, or Tuesday, make your semi-weekly payment no latter than the following Friday.

For information on tracking a:

Federal tax refund, visit this link.

Pennsylvania tax refund, visit link

Maryland tax refund, visit this link .

Virginia tax refund, visit this link.

Washington, DC tax refund, visit this link.

Record Retention Guidelines

Not sure how long to keep those tax and financial records?

When you want to clean out your office after tax season, you may not be sure which records you should keep and which you can discard.

In many cases, the IRS operates by a “three-year law”, which means you should keep important documents for at least three years.

To be on the safe side, we recommend keeping most records for seven years. If the IRS believes you have significantly under-reported your income (by 25% or more), or believes your filings may involve fraud, it can request records as far back as six years in an audit.

Store records in a safe place. If you will be storing your records electronically, make sure you have a secure system for storing them. If you live in an area that is prone to disasters (floodplains for example), you should consider storing records electronically remotely.

Discard records carefully. Identify theft is a fast growing crime. If you will discarding records containing important information (your FEIN, employees social security numbers, bank accounts, etc.), shred the documents. Many local shredding services come to your office to shred a large volume of documents

To be on the safe side, you can use the following as a retention guideline for important business documents.

Common Record Retention Guidelines for Businesses and Nonprofit Organizations

Documents to Keep for One Year

  • Purchase Orders (except purchasing department copy)
  • Receiving sheets
  • Requisitions
  • Duplicate Deposit Slips

Documents to Keep for Three Years

  • Contractors’ payroll information, from date of completion to contract
  • Correspondence with customers or vendors
  • Employee Personnel Records (after termination)
  • Employment applications, for applicants you do not hire
  • Time Cards for Hourly Employees
  • Expired Insurance Policies
  • Internal Audit Reports
  • Petty Cash Vouchers
  • Physical inventory documentation
  • Documents to Keep for Four Years
  • Payroll Registers
  • Sick pay, vacation pay, and PTO documentation

Documents to Keep for Five Years

Employee Benefits Records (including life insurance benefits, dental benefits and garnishments)

Documents to Keep for Seven Years

  • Accident Reports and Claims for Settled Cases
  • Accounts Receivable Aging Reports, Ledgers & Invoices
  • Accounts Payable Ledgers and Schedules
  • Banks Statements and Reconciliations
  • Budgets
  • Cash slips, charge slips, expense reports and Petty Cash Records
  • Deposit Slips
  • Inventories of Products, Materials & Supplies
  • Invoices to Customers and Invoices from Vendors
  • Notes Receivable Ledgers and Schedules
  • Cancelled Checks
  • Cancelled Stock and Bond Certificates
  • Employment Tax Records
  • Payroll Records
  • Expired Contracts, Leases
  • Expired Option Records
  • Sales Records
  • Travel Entertainment Records
  • Vouchers for Payment to Vendors, Employees, etc.

Business Records to Retain Forever

While the IRS will not require you to keep records “forever”, you may find the following documents useful to retain permanently. For example, if you want to sell your business, an acquiring company may want to see records from the past 10 years. We think it is good idea to keep the following permanently.

  • Audit Reports from CPAs/Accountants
  • Cancelled Checks for Important Payments (especially tax payments and loan payments)
  • Cash Books, Charts of Accounts, Journals
  • Contracts, Leases (currently in effect)
  • Corporate Documents (incorporation, charter, by-laws, board minutes, etc.)
  • Documents related to a substantial fixed asset
  • Deeds
  • Depreciation Schedules
  • Year-end Financial Statements
  • General and Private Ledgers, Year End Trial Balances
  • Insurance Records (current accident reports, claims, policies)
  • Investment Trade Confirmations
  • IRS Agents’ Reports
  • Mortgages, Bill of Sale
  • Property Appraisals by Outside Appraisers
  • Property Records
  • Retirement & Pension Records
  • Tax Returns and Worksheets
  • Trademark and Patent Registrations
  • Trademark or Patent Infringement Claims