So you're planning to hire your first employee? Congratulations on reaching the next level of success with your business! As a soon-to-be employer, you're probably wondering about your payroll tax responsibilities.

Here are four key employment tax concepts to get you started.

1. Employee vs. independent contractor.

The amount of control you have over your new worker affects your reporting obligations. For example, if you're paying for the on-line services of a self-employed virtual assistant, you may only need to file "Form 1099-MISC, Miscellaneous Income," at the end of the year.

In contrast, when support staff works in your office under your supervision, you are required to withhold employment taxes, make "matching" payments, and file payroll returns such as "Form W-2, Wage and Tax Statement."

2. Employment tax withholding and expense.

Federal income tax, social security tax, and Medicare tax are deducted from your employee's gross wages.

As an employer, you "match" the social security and Medicare taxes withheld, which means your business is responsible for paying an equal, or matching, amount of these taxes.Other business payroll tax expenses include federal and state unemployment and industrial accident insurance.

3. Paying employment taxes.

As a general rule, you remit the taxes withheld from your employee's wages, plus your matching amount, by completing "Form 8109, Federal Tax Deposit Coupon," and making a deposit to your financial institution each month.

An electronic payment system is also available. Depending on how much you owe, you might have the option of mailing a check with your payroll tax return.

Federal and state unemployment taxes may be payable quarterly or annually.

4. Employment tax returns.

An employer's federal tax return is typically filed four times per year, at the end of each calendar quarter. The return shows the amount of wages you paid, taxes you withheld and deposits you made. State payroll forms may also have a quarterly filing requirement.

You file federal unemployment tax returns, as well as state and federal wage and tax statements, on an annual basis.

Please contact us for more detailed information about employment tax issues. We'll be happy to help you set up a payroll system designed for your business.

Contact Jim Komos of Ciuni & Panichi at 216.831.7171 or jkomos@cp-advisors.com if you would like additional information on taxes and your business.

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