As a small business owner, you understand the harsh reality of the world of taxes more than you’d like to admit. One in three small businesses report spending more than 40 hours a year on federal taxes. And 63% spend more than $1,000 on the administration alone of federal taxes.

Every state, city, and even locality has its own specific taxes, but in this article, we’ll just focus on federal income tax.

What is federal income tax (FIT)?

As an employer, part of your federal payroll tax responsibilities include withholding and payment obligations for FIT. FIT is withheld from an employee’s earnings – such as regular pay, bonuses, and commissions – in addition to other types of earnings.

How are federal income taxes calculated?

Federal income taxes are calculated and withheld when an employee is paid. The withholdings are remitted to the IRS on a regular basis, depending on your payroll schedule.

The amount to be withhold is based on:

  • Exemptions and marital status that the employee provides on Form W-4.
  • IRS tax tables.
  • Size of the wage payment to the employee.

If you’re looking for more FIT information and tax tables, you’ll want to check out IRS Publication 15, Circular E, Employer’s Tax Guide. More tables can be found in Publication 15A: Employer’s Supplemental Tax Guide.

How to reconcile FIT payroll payments.

Reporting to reconcile your FIT payroll payments is typically provided to the IRS quarterly, using Form 941.

The Federal Insurance Contribution Act (FICA) tax is reported in conjunction with FIT on Form 941. The filing deadline for Form 941 is the last day of the month after a quarter end.

Let PrimePay help with your taxes.

When you become a member of the PrimePay payroll and tax family, we’ll handle all of your federal, state, and local payroll tax filing and make sure payments are sent on time.

Learn more here or fill out the form below.