As an employer, you are responsible for various types of federal, state, and local taxes, and you may be required to withhold certain taxes from your employees' paychecks. Employment taxes for which the federal government makes you responsible include:

• Federal income tax withholding
• Social Security and Medicare taxes
• Federal unemployment taxes

Federal Income Taxes

The federal income tax system is based on a pay-as-you-go plan. Therefore, an employer is required to withhold federal income tax from almost everyone's wages and to pay them over to the government. The employer does not pay the employee's income taxes - he just transmits the income taxes withheld from the employee's pay. The employee fills out a form that allows the employer to withhold an amount based on marital status and claimed dependents.

Social Security and Medicare Taxes

Social Security taxes pay for benefits under the old-age, survivors, and disability portion of the Federal Insurance Contributions Act (FICA). Medicare taxes pay for benefits under the hospital insurance part of FICA. These taxes differ from income taxes in that both the employer and the employee are responsible for a portion of the tax. The employer is required to withhold both Social Security and Medicare taxes and to pay a matching amount.

Federal Unemployment Taxes

This tax is part of a federal and state program that pays unemployment compensation to employees who have lost their jobs. The employees do not pay any portion of tax liability imposed by the Federal Unemployment Tax Act (FUTA). FUTA is the sole responsibility of the employee.

Depositing Taxes

It is the obligation of the employer to deposit the employee's income tax and both the employer's and the employee's Social Security and Medicare taxes in a financial institution that is an authorized depository for those payments. The frequency of the required payments is determined by the amount of tax in the hands of the employer.

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