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Setting up a Payroll System for Your Business

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Understanding Your Responsibilities as an Employer

Understand your responsibilities for payroll taxes

As a business with employees, you have certain important responsibilities. Having an understanding of these responsibilities will help you in making certain that you comply with the law. All employers must:

  • Withhold appropriate taxes from employees. These taxes include the federal, state, and local taxes the employees must pay, and the employee's portion of Social Security and Medicare taxes. You withhold the income taxes as the employee has designated.

  • Set aside funds for these payroll taxes, including both employer and employee portions of Social Security/Medicare, and employer liabilities for unemployment compensation and worker's compensation.

  • Remit(pay) both the employee taxes and employer taxes to appropriate agencies. For example, you will pay both the federal income tax withholding and Social Security/Medicare amounts to the IRS.

  • Report tax liabilities to appropriate agencies and to employees, as specified by law.

  • Provide other reports to federal, state, and local agencies as required. For example, you must report the employment status of all new employees.

One more note: Before you begin to hire employees, you must obtain an Employer ID Number (EIN) from the IRS by completing an SS-4 form, either online or by phone.

For More Information:
How to Apply for an Employer ID Number

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