Employers have several tax responsibilities that they must adhere to. These include withholding federal income tax from employee wages. The rates for this are graduated based on the employee's income, filing status, and allowances claimed on Form W-4. The payment deadlines for these taxes vary, with deposit schedules being either monthly or semi-weekly, based on the total tax liability.

Social Security and Medicare Taxes (FICA)

Employers and employees share the cost of FICA taxes. The rates for Social Security are 6.2% for both the employer and employee up to the annual wage base limit, which is adjusted yearly. For Medicare, the rate is 1.45% for both the employer and employee, with no wage base limit. The payment deadlines for these taxes are the same as the deposit schedules for federal income tax withholding.

Federal Unemployment Tax Act (FUTA)

Employers are solely responsible for paying FUTA tax. The rate for this is 6% on the first $7,000 of each employee's wages. Most employers are eligible for a credit against FUTA of up to 5.4%. The payment deadlines for this tax are typically due quarterly, but may be due annually if liabilities are small.

State Taxes

Most states have income tax withholding requirements, with rates and regulations varying by state. Employers also contribute to state unemployment insurance funds, with rates and regulations being state-specific. Some states may have additional employer taxes, such as disability insurance or workers' compensation.

Reporting Requirements

Employers must file various forms with the IRS and state agencies to report withheld taxes and employer contributions. These forms include Form 941, which is used to report income tax withheld, employer/employee portions of FICA, and FUTA. Form 940 is used to report annual FUTA liabilities. State-specific forms vary by state for income tax withholding and unemployment insurance reporting.

Employees are subject to several mandatory federal deductions.

Federal Income Tax Withholding

All employees subject to income tax are eligible for this deduction. The calculation is based on the employee's income, filing status, and withholding allowances (Form W-4).

Social Security and Medicare Taxes (FICA)

All employees subject to FICA taxes are eligible for this deduction. The calculation for Social Security is 6.2% of wages up to the annual wage base limit (adjusted yearly), and for Medicare, it's 1.45% of all wages.

State and local deductions also apply to employees.

State Income Tax

This applies in most states. Rates and rules vary by state.

Local Income Tax

This may apply in certain cities or counties. Rates and rules vary by locality.

There are also optional pre-tax deductions if offered by the employer.

401(k) or Similar Retirement Plans

Contributions reduce current taxable income.

Health Insurance Premiums

A portion of premiums may be deducted pre-tax.

Flexible Spending Accounts (FSA)

Pre-tax deductions for eligible healthcare expenses.

Health Savings Accounts (HSA)

Pre-tax savings for qualified medical expenses (requires a specific type of health plan).

Other Benefits

May include commuter benefits, dependent care FSAs, etc.

In the United States, there is no federal Value-Added Tax (VAT). Instead, the country primarily relies on sales taxes and other forms of taxation.

State-Level Sales Taxes

Certain states impose sales taxes on specific categories of services. The types of services taxed and the specific rates vary significantly between states. For accurate details, it's advisable to check with your state's department of revenue or taxation.

VAT Considerations for International Transactions

If you provide services from the U.S. to customers located in countries with a VAT, you'll likely need to consider the VAT rules of the customer's jurisdiction. On the other hand, if you procure services from providers located outside the U.S., the foreign provider might charge you VAT based on their jurisdiction's regulations.

For information on potential sales taxes applicable to services, refer to your state's department of revenue or taxation website.

The United States government offers a variety of tax incentives to businesses at the federal, state, and local levels. These incentives are designed to encourage investment, job creation, and economic development.

Federal Tax Credits

Businesses can claim tax credits for a portion of the cost of certain qualifying investments in property, such as machinery and equipment. This is known as Investment Credits. There's also the Work Opportunity Tax Credit (WOTC) which encourages employers to hire individuals from certain target groups who face employment barriers. Businesses engaged in qualified research activities can claim a credit against their federal income taxes, known as the Research and Development (R&D) Credit. Several tax credits are specifically available to small businesses, including credits for health insurance premiums, startup costs for retirement plans, and employer-provided child care.

State and Local Incentives

In addition to federal tax credits, many states and localities offer their own tax breaks to businesses. These incentives can vary widely depending on the jurisdiction, but they may include cash grants, property tax abatements, sales tax abatements, tax holidays, and infrastructure improvements. Cash grants are direct financial assistance provided by the government to businesses. Property tax abatements are reductions in property taxes for businesses that meet certain criteria. Sales tax abatements are exemptions from sales taxes on purchases of machinery, equipment, or other business supplies. Tax holidays are periods of time during which a business is exempt from certain taxes. Infrastructure improvements are government investment in infrastructure projects that benefit businesses, such as roads, bridges, and utilities.

Finding Available Incentives

The specific tax incentives available to a particular business will depend on its location, industry, and size. Businesses should consult with a tax advisor to determine which incentives they may be eligible for. State and local governments often have websites that list available tax incentives for businesses. You can also contact your local economic development agency for more information.