Small Business/Self-Employed/Other Business > Forms 941, 940, Employment Taxes

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Frequently Asked Tax Questions

Small Business/Self-Employed/Other Business - Forms 941, 940, Employment Taxes

Rev. date: 1/2010

We are about to hire employees and need to know how much tax to take out and where to send this money?

Circular E, Employer's Tax Guide

You will need:

To secure a completed Form W-4 (PDF), Employee's Withholding Allowance Certificate, from each employee.
Publication 15, Circular E, Employer's Tax Guide, and Publication 15-A (PDF), Employer's Supplemental Tax Guide, to determine the amount of withholding and for directions on depositing the withholding amounts and other employment taxes.

Generally, employers are required to quarterly file Form 941 (PDF), Employer's Quarterly Federal Tax Return, and annually file Form 940 (PDF), Employer's Annual Federal Unemployment Tax Return (FUTA), and Form W-2 (PDF), Wage and Tax Statement, with Form W-3 (PDF), Transmittal of Wage and Tax Statements. Some small employers (those whose annual liability for social security, Medicare, and withheld Federal income taxes is $1,000 or less) may file Form 944-SS (PDF), Employer's Annual Federal Tax Return, instead of Form 941, if the IRS has notified them to Form 944 instead of Form 941. New employers are also eligible to file Form 944, if they will meet the eligibility requirements. New employers filing Form SS-4 Form SS-4(PDF), Application for Employer Identification Number, must check the "Yes" box or "No" box on line 14 to indicate whether they expect to have $1,000 or less in employment tax liability for the calendar year.

The Employment Tax e-file System offers an improved way to file Forms 940,941, and 944 electronically. Prospective participants must first complete and submit an IRS e-file application. You can complete the IRS e-file application online after registering for e-services.

Rev. date: 1/2010

We hired a nanny to look after our baby while we work. How do we pay her social security taxes and properly report her income?

Employment Tax
Household Employer's Tax Guide
Household Employment Taxes
Housekeepers, Maids, or Servants
Social Security and Medicare Taxes
Withholding Tax

A nanny is considered a household employee:

A household employer only has to pay social security and Medicare taxes only on cash wages paid to an employee that exceed the threshold amount for the year.
If the amount paid is less than the threshold, no social security or Medicare taxes are owed.
If social security and Medicare taxes must be paid, you will need to file Form 1040, Schedule H (PDF), Household Employment Taxes.
You must withhold the employee's portion of the social security and Medicare taxes unless you choose to pay both the employee's share and the employers share. The taxes are 15.3% of cash wages. Your share is 7.65% and the employee's share is 7.65%.
You may also be responsible for paying federal unemployment taxes, reported on Form 1040, Schedule H.
You and your employee may agree for you to voluntary withhold income tax from wages paid to the employee, reported on From 1040, Schedule H.

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