Law on Small Businesses Withholding Taxes for Hourly Employees
Rules, regulations, ordinances and laws govern how business is conducted in the United States and how business taxes are processed. Federal and state laws govern requirements for small businesses and the procedures that must be followed for withholding taxes for hourly employees. The Internal Revenue Service requires businesses to maintain employment tax records for no less than four years. Accurate record-keeping is essential to minimize the risk of any venture.
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Federal Withholding
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The law on small business withholding taxes for hourly employees mandates that employers receive a signed withholding exemption certificate from each employee. This certificate is Form W-4 and should be in the possession of the employer on or before the day the employee starts work.
The employer must submit all W-4 forms to the IRS. W-4 forms can also be used as exhibits to support written company information statistics.
W-2 Forms
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Once a year, business owners must report to the IRS the amount of wages and taxes including withholding paid for each hourly, salaried and otherwise financially compensated employee.
Form W-2, a wage and tax statement form, must be delivered to each employee by Jan. 31, with a copy to the Social Security Administration no later than the last day in March if filing electronically. -
Non-resident Alien Employees
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The law with two exceptions requires withholding income taxes on the wages of non-resident alien employees, with exemptions for students and business apprentices from India.
Employers must use specific tables to calculate withholding taxes from the income of non-resident alien employees. The necessary forms and tables can be found in the Employers Tax Guide, a federal government publication.
State Laws for Withholding Taxes
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Most states require income taxes to be withheld from employees compensated hourly and by other forms of compensation. Each state that requires by law the withholding of hourly employees taxe has provided specific guidelines and procedures in state tax formbooks. All required withholding taxes are paid each pay period as per state and federal law.
New Withholding Tax Laws
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Tax laws were recently changed affecting the amount of taxes to be withheld from employee's wages. Every time a law changes and affects the amount of wages to be withheld by employers, another table is provided for small business to calculate the taxes.
Employers must by law use the appropriate tax forms and calculate withholding taxes from hourly employees with the most current table.
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