What Are My Responsibilities as an Employer?

As a business owner, your greatest responsibility rests with your duty to ensure your employees' taxes are accounted for. This is paramount even over your own business tax obligations, since the IRS holds you personally liable, and entrusted with, this stern charge.

What taxes should I, as the employer withhold? How do I do so and what happens if I do not make my payments?

In general, if you have employees, you will need to present them with a Form W-4, Employee's Withholding Allowance Certificate. The elections that your employee will make on the W-4 dictate the rate at which they want to have federal taxes withheld.

Once you secure a W-4, it remains in effect until the employee gives you a new one. Remember, it is your employees' responsibility to make certain the appropriate amount is withheld from their pay to cover their taxes, not yours. However, the IRS online Withholding Calculator application can assist your employee and let them know the rate they should be withheld at.

You are responsible for withholding federal taxes, as well as a portion of Social Security and Medicare tax as well. Combined, these are referred to as FICA tax. You withhold part of this from the employees' pay, and you also must match a portion of it.

These taxes are reported to the IRS via Form 941, Employer's Quarterly Federal Tax Return. The 941 is filed quarterly. Your initial 941 is filed for the quarter in which you first paid out wages that are subject to the above taxes. Thereafter, you must file for every 3-month quarter after that, even if you have no taxes to report.

The 941 filing schedule is as follows:

• January, February and March taxes close March 31 and are due by April 30
• April, May and June taxes close June 30 and are due by July 31
• July, August and September taxes close September 30 and are due by October 31
• October, November and December taxes close December 31 and are due by January 31 of the following year

You also need to be aware of how often the IRS expects you to make your deposits. In some cases, it's acceptable to pay your taxes in full with your 941 filing. In most other cases, you will need to determine if you are a monthly or semi-weekly depositor.

In addition to your employees' withholding and FICA tax, you also will need to pay into the Federal Unemployment Tax fund (FUTA tax). These payments are made regardless of whether your employee ever draws unemployment or not.

FUTA tax is taken only from your own funds. Employees do not ever pay this tax nor do they have it withheld out of their pay. FUTA tax is paid and reported via Form 940, Employer's Annual Federal Unemployment Tax Return.

Failure to deposit or pay over your employees' taxes is a serious breach of the trust that you have taken on. For that reason, if you are overly-delinquent in your payroll tax obligations, or if your business becomes insolvent and the taxes remain unpaid, the IRS may assess a Trust Fund Recovery Penalty against you personally, as well as against any of the other corporate officers or liable parties.

For more information on the Trust Fund penalty, see the linked articles below.

For information on deposit schedules and other topics related to the above, review IRS Publication 15, Employer's Tax Guide.

More from this Contributor:

What is the Trust Fund Recovery Penalty?

Your guide to small business tax deductions

Small business taxes FAQs