Employee taxes can be a difficult area to understand when you’re running a business and hiring employees. If you don’t understand the complexities about employee payroll taxes, you can end up in a great deal of trouble. That’s why you need to apply for Colorado tax ID just to remit the taxes paid by your employees due to the state government.
As an employer, you need to know what type of taxes you are responsible. You need to consider four types of employee taxes you need to pay in behalf of your employees:
- Withholding Employee tax: Even if this is the employee’s contribution, you need to handle their employee tax withholding. You will need to handle the employee tax form to know how much money you should subtract from them for the withholding tax. The money you withhold from them will depend on their allowances, their marital status and exemptions that the employee will claim.
- Federal Unemployment tax: This is funding for the administrative costs and state unemployment benefits. You need to know that you are mandated to pay federal unemployment tax for the first $7000 earned by your employee during the calendar year of his employment.
- State Unemployment tax: The taxes you pay here will be based from the location and size of your business and the number of employees working for you. The state has its own unemployment programs where the rates can vary. So you need to check with them for specific details related to the program.
- Medicare and Social Security tax: This is also referred to as FICA and provides the welfare benefits funding for senior citizens. As an employer, you will pay half of the FICA taxes and withholdings for your employee while the remaining half is withheld from their salary.
As an employer, you need to be extra careful with all the payroll taxes your employees are liable. You need to deduct the correct amount of money so you won’t end up paying penalties with the IRS. Pay the federal and state government what is due them so you need to ensure accuracy in the computations. Remember, you also need to apply for Colorado tax ID to identify your business in all the paperwork your business needs to do.