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Withholding federal tax income

20 Jun 2017Government and Law Essays

The essay discusses various responsibilities of employers in respect to withholding of taxes. It indicates that employers play a crucial role in the administration of tax laws and in the collection of taxes from the employees. The essay shows the importance of employers playing their responsibilities well as they ease the collection of taxes by making it time efficient and cost effective. The responsibilities of employers in respect to withholding of taxes are mandatory and therefore any employer who fails to follow them fully is liable under the tax laws.

Introduction

Employees earn taxable income as a result of services they offer to their respective employers. Anyone earning some income is expected under the tax laws to pay all the taxes without delay to the tax authorities. One of the major principles of tax collection is being economical in collecting taxes. The tax laws thus require any employer remunerating taxable income to an employee to deduct the tax liable on the employee’s remuneration before paying an employee his or her remuneration net of withholding tax. The employer is then required to submit the withheld taxes to the tax authorities on behalf of his or her employees (Dimsuyu, 1998).
Responsibilities of employers in withholding federal income tax

All employers have the responsibility of withholding all the tax due on their employees in respect to the remuneration being paid to the employees. This implies that if an employee has other sources of income which are taxable, the employer cannot withhold taxes based on such incomes which are not earned from the employment offered by the employer. The employer thus indicates on the pay slip of the employer, the gross income earned by the employee and the withheld tax. Basically, by the employer withholding taxes liable on his employees to the tax authorities, he simply collects such taxes on behalf of such authorities (Schriebman, 2002).

Each and every household employer is required under the tax laws to withhold the right taxes from the paychecks of their employees. Specifically, the employers have the responsibilities of withholding the following taxes; half of the employee’s Medicare and social security; federal income taxes which should be based on the chosen allowances by the employee found in form W-4; state income tax that is based on the allowances selected by an employee also on W-4 form; and finally, the employers have the responsibility of withholding state taxes. This implies that before an employer pays his or her employees their wages, the employer must deduct such taxes and pay them to the respective tax authorities. But all the deductions made by the employer in respect to taxes withheld must be well indicated on the employees’ pay slips in order to show how the net payable amount was arrived at (Ryesky, 2003).

Employers are required to report all income earned by their employees and the employment taxes they withhold from the income of their employees. They should then deposit the full amount of these taxes to either a bank or any other authorized financial institutions on behalf of their employees. The authorized financial institutions where the withheld taxes are deposited have to meet all the deposit requirements as stipulated by the federal tax laws.

Every year, an employer has the responsibility of filling in the FUTA report. This report shows the amount of tax withheld by the employer during the year, the income that was earned by the employees and the taxes paid by the employer on behalf of the employees to the federal tax authorities (Schriebman, 2002).

It is the responsibility of the employers to ensure that before the first day of December every year, he or she has advised all the employees to fully update their tax withholding forms. Employers should ensure that all the employees have duly completed and filed form W-4, which is the withholding certificate of the employees, and if there is any alteration which have o be made should be done so in time. If the completion of such forms indicates that an employee has altered his or her name recently, the employer has the responsibility of advising such an employee to report such changes to SSA in order to be given the social security card which reflects such changes.

The employers also have the responsibility of telling their employees that all the social security cards must be up dated regularly in order to show clearly the names that are applicable for purposes of employment (Schriebman, 2002).

It is worth noting that the responsibilities of employers in respect to withholding of taxes are obligations under the tax laws. This therefore means that employers must fully comply with all the stipulated requirements under the tax laws regarding withholding of taxes. Employers who fail to comply with these laws are liable under the law. In addition, they have to pay the taxes which were due on the employees, which they did not withhold (Dimsuyu, 1998).

Conclusion

All employers are required by the tax laws to withhold certain taxes from the taxable incomes of their employees. The responsibilities of the employers regarding to withholding of taxes ensure that there is increased tax collection efficiency as taxes of several employers are collected from a central point as opposed from being collected from each and every employer. It is the responsibility of the employers to deposit the withheld taxes banks and other financial institutions that are duly authorized by the tax authorities. The employers also have the responsibility of advising their employees on various issues relating to withholding of taxes. Such responsibilities enable the employees to be more conversant with the tax laws and also be able to complete various forms that are required for purposes of withholding of taxes.

Reference:

  • Dimsuyu, I. (1998): New York State and City Withholding Obligation, Magazine article of The CPA Journal, Vol. 68
  • Ryesky, K.H. (2003): "In Employers We Trust": the Federal Right of Contribution under Internal Revenue Code Section 6672, Fordham Journal of Corporate & Financial Law, Vol. 9
  • Schriebman, R.S. (2002): IRS Tax Collection Procedures, ISBN 0808008447, CCH.

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