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Determine Federal Income and Employment Tax Withholding
Key Points
One of the most important payroll processes for all employers is withholding federal income and employment taxes (i.e., Social Security and Medicare taxes) from an employee's pay.
Proper withholding leads to correct paychecks and timely remittance of the taxes withheld to the appropriate government agencies without incurring costly penalties.
The income and employment tax withholding process requires an employer to know:
How to obtain, verify and correctly record employees' Social Security Numbers;
Which of the various withholding methods to use in any given situation and how to apply those methods to determine the correct amount of tax to withhold; and
How to determine withholding in special situations, such as when the employer receives an IRS Lock-In Letter for an employee, or if there is an extra pay period in a calendar year.
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