Overview: Employers are required to withhold payroll taxes from each employee's pay and remit and report the amounts withheld to the federal government. Payroll taxes include:
Employers that fail to fulfill these requirements are liable for serious penalties. HR managers that oversee payroll departments are responsible for avoiding such penalties by ensuring that payroll tax laws are complied with.
Trends: An employer must use IRS Form W-4 to calculate the amount of income tax to withhold from each employee's pay. The IRS completely redesigned Form W-4 starting with calendar year 2020 to comply with changes made by the 2017 federal tax reform law. Because the changes to the form are so extensive, an employer must know which employees it is required to provide the new form to, how those employees should complete the form, and how to use the information provided by each employee on the form to determine proper income tax withholding.
Author: Rena Pirsos, JD, Legal Editor
Updated to include Form W-2 reporting requirements for EPSLA and EFMLEA credits under IRS Notice 2020-54.
Updated to reflect an amendment to the Florida Civil Rights Act.
Updated to reflect amendments regarding seasonal employment, effective July 1, 2020.
Updated to reflect amended quarterly reporting and penalty provisions, effective July 1, 2020.
Updated to reflect the Seattle Improving Access to Medical Care for Hotel Employees Ordinance, effective July 1, 2020.
Updated to reflect guidance on nexus in Vermont.
This checklist may be used by an employer with employees who telecommute in other states to determine whether income tax nexus and withholding for those states has been triggered. It may also be used to determine the states to which the employer must pay unemployment contributions on behalf of such employees.
President Donald Trump signed the Paycheck Protection Program Flexibility Act of 2020, which modifies provisions related to the forgiveness of loans to small employers under the PPP.
Updated to reflect 2021 inflation-adjusted amounts for health savings accounts.
HR guidance on compliance with payroll taxes, including income taxes, Social Security and Medicare (FICA) taxes, and unemployment, disability and workers' compensation insurance taxes.