How to Calculate Employer Payroll Contributions

When you start hiring employees for your business, you will be required to prepare and file payroll tax returns. You also must withhold taxes from the your employees' wages. If your employees receive tips as part of their compensation, those amounts must be accounted for on the payroll tax returns. Form 941 is the tax return used to report payroll taxes.

Difficulty: Moderate

Instructions

1. Download Form 941 Employer's Quarterly Federal Tax Return from the IRS website.

2. Complete the employer information on Form 941 and the employer identification number (EIN). Show the quarter for the year which is being filed.

3. Report the total wages and the tip income which are subject to the Social Security (FICA) tax, taking maximums into account, and then the amounts of wages and tips subject to the Medicare tax. The tax rates from each category are applied and the total tax is calculated which includes the employees' shares withheld from wages.

4. Add the income tax withholding from employees' wages to the FICA and Medicare taxes to arrive at the total. Subtract any payments of advance earned income credit to employees from the tax liability.

5. Pay the tax due when you file Form 941 if the amount is less than $2,500 for the quarter. If the tax due is more, you will have to make deposits.

Resources

• Access Form 941 from the IRS website.