The 941 is the most common payroll tax reporting form. It is due quarterly and contains detail on the total payroll and the amount of withholding, social security, and medicare tax the employer is reporting for that quarter.

The 943 form is used instead of the 941 form if you only employ agricultural employees.

The 944 form is used for small businesses that report less than $1000 per year in payroll taxes and is only due annually. This form should only be used by employers who have received notification from the IRS that they should use this form.

As an employer, your business can receive a tax credit for hiring qualified individuals. The list of qualified employees includes:

• Qualified recipient of assistance under temporary assistance for needy families (TANF).
• Qualified veteran.
• Qualified ex-felon.
• High-risk youth.
• Vocational rehabilitation referral.
• Qualified summer youth employee.
• Qualified food stamp recipient.
• Qualified SSI recipient.

Please visit this link for more information http://www.irs.gov/faqs/faq-kw208.html.

• Employers are required to verify the employment authorization of each employee they hire. This is done with the I-9 form, a copy of which must be completed for each newly-hired employee. I-9 forms should be filled out for all new employees within 3 business days of the hire date.
• If a new hire shows the documents listed on the form, the I-9 requirements are satisfied. The employer should (but is not required to) make copies of the documents shown by the employee and keep them in a separate I-9 file in case of an audit.
• The employer is not required to be a document-authentication expert, but should show good faith in determining if the documents are genuine.
• I-9 records must be kept for three years following the date of hire, or for one year after the employee leaves, whichever is later. However, it is recommended to keep this and all employment records for at least 7 years after the employee leaves in order to exhaust all the statutes of limitation.

Please visit the TWC http://www.twc.state.tx.us/news/efte/i_9_procedures.html for more information on this topic.

If you receive a letter from the IRS stating that you owe penalties and interest for your business payroll, call the IRS immediately. Many penalties come from late payments and late or incorrect reports. The IRS will often waive penalties if your business has a record of filing and paying taxes on time. If you have not paid your payroll taxes, the IRS may work with you to establish an acceptable payment schedule to get you back on track.

The due dates for filing your payroll reports and depositing payroll taxes can be different, depending on the type and amount of tax that you owe.

941 Taxes and Reports (Withholding, Social Security, Medicare)
941 reports are quarterly reports and are due on the last day of the month following each quarter - April 30th, July 31st, October 31st, and January 31st. There is a 10-day filing extension if you have made timely tax deposits in the full amount.

941 tax deposit due dates vary based on the amount of taxes that you owe. These taxes are paid via the EFTPS on-line system or depositing a Federal Tax Coupon at your bank.

• If you have less than $2,500 in 941 taxes for the quarter, you may send in a check with your 941 report on the report due date
• If you owed less than $50,000 in your lookback period, taxes should be deposited on the 15th of the month following your payroll month (i.e., January 941 taxes would be due Feb 15th). If the 15th falls on a weekend or holiday, the taxes are due on the first business day after the 15th.
• If you owed more than $50,000 in your lookback period (July 1 of the second preceding calendar year through June 30 last year), your taxes are due on a semi-weekly schedule:
• 1. Wed/Thu/Fri payroll deposits made by Wed of the next week
  2. Sat/Sun/Mon/Tues payroll deposits made by Friday after payroll

940 Taxes and Reports (Federal Unemployment - FUTA)
940 reports are annual reports due on January 31st each year.

940 taxes are due quarterly on the last day of the month following each quarter. If your total 940 liability is less than $500, the deposits can be rolled over to the next month.

State Unemployment - SUTA
Texas State Unemployment taxes and reports are due to the Texas Workforce Commission quarterly on the last day of the month following each quarter. The reports can be filed on state generated C-3 forms, or you can use the TWC on-line filing system.

It is important to know the difference between a contract worker and an employee as defined by the IRS. If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

Who is an Employee?
A general rule is that anyone who performs services for you is your employee if you can control what will be done and how it will be done.

Instructions that the business gives to the worker:

• When and where to do the work
• What tools or equipment to use
• What workers to hire or to assist with the work
• Where to purchase supplies and services
• What work must be performed by a specified individual
• What order or sequence to follow

Who is an Independent Contractor?
A general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

Statutory Non-employees
There are two categories of statutory non-employees: direct sellers and licensed real estate agents. They are treated as self-employed for all Federal tax purposes, including income and employment taxes, if:

1. Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked and
2. Their services are performed under a written contract providing that they will not be treated as employees for Federal tax purposes.

How should I report payments made to independent contractors?

You may be required to file information returns to report certain types of payments made to independent contractors during the year. For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (e.g. independent contractors) for services performed for your trade or business.

More information on this topic can be found on the IRS website, publication 15-A, at http://www.irs.gov/publications/p15a/.

This represents the federal employer taxes and state taxes for employers in Texas. Employers in other states may have different Unemployment and State or Local taxes owed.

• Employers must withhold income tax from their employees. The amount is determined by the total pay, the employee's marital status, and the employee's number of allowances claimed on their W-4 form. While this is not an additional expense to the employer, the employer is responsible for withholding this tax and depositing it with the IRS.

• Employees pay 6.2% of their income for Social Security taxes. The employer matches that tax, resulting in a cost to the employer of 6.2% of employee earnings. In 2007, the maximum salary for which you pay Social Security is $97,500.

• Employees pay 1.45% of their income for Medicare taxes. The employer also matches that tax, resulting in a cost to the employer of 1.45% of employee earnings. There is no maximum salary for Medicare taxes.

• The federal unemployment tax for the state of Texas is 0.8% of income up to $7,000 of income each year. The maximum federal unemployment tax is $56 per employee per year.
• Federal unemployment tax information is reported quarterly on IRS form 940

• Texas unemployment taxes are based on an "experience" rate from the State of Texas. New employers are assigned an experience rate of 2.7%. Employers pay 2.7% of the first $9,000 of wages for each employee, with a maximum of $243 per employee per year.
• After the first year, the State of Texas may reduce your tax rate based on your company's experience, which means the fewer unemployment claims you have, the lower you tax rate will be.

Texas unemployment tax information is reported quarterly on Texas form C-3.

There is a federal mandate that requires employers to report new hires within 20 calendar days of their start date. In Texas, the new hires are reported to the Texas Attorney General's office.

The Child Support Division of the Attorney General's office uses new hire information mainly to help enforce child support orders. The new hire data is also shared with the Texas Workforce Commission in order to prevent unemployment fraud and to help keep unemployment taxes lower.

Reporting new hires to the Attorney General's office is a simple process. Your payroll processor should automatically manage this for you. If you are doing your own payroll and you have not been reporting your new hires, you should visit the Attorney General's web site to get into compliance with this law.

Overtime rules are regulated by the Fair Labor Standards Act. In most situations, overtime must be paid at one and one-half times the regular rate for non-exempt employees that work more than 40 hours in one work week, which is a 7-day period. The employer is not required to pay overtime for more than 8 hours worked in one day as long as the employee does not go over 40 hours for the week. Hours cannot be averaged between two weeks in a pay period. For example, if an employee works 32 hours one week and 48 hours the next week, overtime must be paid in the week the employee worked more than 40 hours.

There are exceptions to this general rule, mainly due to alternate work schedules. This applies most often to medical care providers, police officers, fire fighters, and EMS personnel. The Fair Labor Standards Act web site, www.flsa.com has more detailed information on this topic.