Home | Employment Tax Requirements for Small Businesses

Employment Tax Requirements for Small Businesses

Feb 06, 2023

Operating a small business with employees can be extremely rewarding but also demanding in ways not always anticipated. It is crucial for small businesses to understand their employment tax obligations, as employment tax debt is the most common type of tax problem we find tripping up small business owners.

Having an employment tax debt can have dire consequences for a business. If the unpaid tax debt grows too large, the Federal or State Government can force the business to close. To make the situation worse, most business owners do not know that because employment tax is considered a “trust tax” (meaning someone oversees the collection of the tax on the behalf of the business and ensures the money is held “in trust” to turn over to the government), the government can hold a responsible individual personally liable for the taxes not paid.

To ensure your business does not fall behind on its tax obligations and cause a tax debt to accrue, we recommend the following best practices to every business owner and/or officer:

1 - Educate yourself on the business’s employment tax requirements

Knowledge is power; by knowing the ins and outs of your business’ tax obligations, you are fulfilling your fiduciary responsibility and expectations as an owner or officer of the business. When it comes to tax obligations, the different payroll deductions can include the following:

  • Federal income tax
  • Social security tax
  • Medicare
  • Federal unemployment tax
  • State income tax
  • State unemployment tax
  • Local taxes on the city or county level

In addition to the above, your business may also have to pay into a state-run Worker’s Compensation fund or Family and Medical Leave Insurance program if required by your state.

Phew, that is quite a lot of tax obligations to learn about and understand! If you have a question about the various obligations your business must maintain, please speak with your trusted bookkeeper or accountant. She/He can outline for you the various obligations and provide the resources available to learn more about each obligation.

2 - Implement a reliable payroll system

Let’s face it… as a business owner or officer, your time is extremely valuable. Tending to something like the weekly or biweekly payroll responsibilities of your organization is something that should be outsourced to a professional. Take the time to do your homework before getting into bed with a payroll services provider! Many of the nationwide, leading payroll firms had at one time been the most reliable and had provided excellent customer service. Over the last decade, significant changes occurred, and many clients have left these well-established organizations due to poor customer service, high fees, or errors made with the payroll responsibilities.

When considering a payroll provider, inquire about their fees, their websites/portal for you and your employee’s access, whether they will electronically file and pay all tax obligations, if they will take responsibility for the electronic submission of your company’s annual W-2s and W-3, if they will offer direct deposit for your employees, if their systems will track things such as PTO/Sick/Bereavement time for your employees, and last, and perhaps most important, if they will handle any payroll tax reporting or payment discrepancies caused by their errors. If they cannot or will not commit to all of these services, move on to one that will.

Please keep in mind that as the client, it is acceptable to ask for updates or proof of the obligations the payroll services provider has committed to handling on behalf of your business. Most professionals will understand why and should even be proactive by providing updates and proof as a matter of standard operating procedure. Never be afraid to ask questions or ask to have something explained, as this is your business, and if it doesn’t make sense to you, you must ask questions until it is fully understood.

3 - Don’t forget about your tax return or tax report obligations

On top of understanding your tax payment obligations, it is always essential to understand the business’s filing requirements. Even if the taxes are being paid, if the returns are not being filed, you could face penalties and interest that can add up quickly. Most payroll providers will also provide tax return preparation services pertaining to employment tax. If they do, ensure they address both the Federal and State returns. If not, it is your responsibility to complete and file those returns timely or hire a tax return preparer to complete and file them.

More often than not, the clients the Team at Golden Lion Tax Solutions works with had hired a payroll service provider to handle all the payroll-related tax obligations for their business, yet they failed to meet all the obligations they had committed to. This was either in the way of tax filings that were not submitted, withheld tax that did not get paid to the government, or even the embezzlement of the tax funds they were retained to handle.

As you can see, it is detrimental to a business’s success to educate yourself on the payroll and employment tax obligations of your business. As stated above, the Golden Lion Tax Solutions team has dealt with several clients who either did not know their obligations or relied on a provider that did not deliver the services they were hired to perform. While we are more sensitive to these unfortunate occurrences, the Federal and State Governments are not as sympathetic toward taxpayers who do not fulfill their tax payment and filing obligations, ESPECIALLY taxes that are considered trust taxes. So, if you find yourself one of the businesses that did not have a reliable professional assisting with tax preparation or tax payments, reach out to the Team at Golden Lion Tax Solutions. We will get you back on track, help resolve your tax debt, and, if necessary, introduce you to reliable professionals who will ensure you remain on top of your tax obligations, alleviating stress levels and preventing potential future balances.


Trust. Protection. Wisdom.

Your future and your family deserve the right protection. Golden Lion Tax Solutions will be your advisor and confidant throughout the entire journey. We guarantee to offer you or your business best-case solutions for your tax debt. We are by your side every step of the way. Start now and get your life back.

For help with your tax debts, email contactus@goldenliontaxsolutions.com or call 833-LION-TAX (833-546-6829)

Disclaimer: There are requirements that must be satisfied in order to qualify for some of the tax solutions we discuss on our website. Not all of our services will be suitable for every client. Golden Lion Tax Solutions is here to help you find the most appropriate solution to fit your situation.