Overview: The most important payroll process for all employers is undoubtedly withholding for federal, state and local income and employment taxes and timely remitting the amounts collected to the appropriate government agencies. In turn, proper withholding leads to correct employee paychecks, and timely remitting of withheld taxes avoids serious employer penalties.
The income and employment tax withholding process requires an employer to understand:
Author: Rena Pirsos, JD, Legal Editor
Updated to include new data breach notification requirements, effective July 1, 2017.
Updated to reflect a forthcoming change in return filing frequency.
Updated to include the final IRS procedure for requesting an employee's consent to seek a refund of overpaid FICA tax, effective June 5, 2017.
The IRS has issued Rev. Proc. 2017-28, clarifying the procedure by which an employer may request an employee's consent to seek a refund of overwithheld FICA taxes on the employee's behalf, beginning June 5, 2017.
Some states that require employers to withhold income taxes from employees' wages tie their definitions of "wages" to the federal Internal Revenue Code (IRC). However, many states update their IRC references to a specific date every year or so, while others roll their references into the current version of the IRC. Even with IRC conformity, some states have important exceptions. This Quick Reference chart summarizes each state's IRC conformity reference.
Updated to include changes to Form IL-941 and the filing and payment schedules, effective January 1, 2017.
Updated to include changes in the local income tax structure and rates, effective January 1, 2017.
Updated to include increased deposit threshold amounts, effective January 1, 2017.
An explanation of the process of payroll withholding of federal, state and local income taxes and Social Security and Medicare (FICA) taxes.