Publication 5258 - Federal Tax Deposits Page 5
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trust fund taxes are
important
c hapterone
W
hen you pay your employees, you do not pay them all the money they
earned. The income tax and the employees’ share of FICA (social security
and Medicare tax) you withhold from your employees’ paychecks are the part of
What it means
their wages you pay to the United States Treasury instead of to your employees.
trust fund tax: Money
The portion of their wages you hold for transmitting to the United States Treasury
withheld from an
is called “Trust Fund” taxes. Through this withholding, your employees pay their
employee’s wages
contributions toward their social security and Medicare benefits and the income
(income, social securi-
taxes reported on their own tax returns. Your employees’ trust fund taxes, along
ty and Medicare taxes)
with the employer’s share of FICA tax, are paid to the United States Treasury
by an employer and
through the Electronic Federal Tax Payment System (EFTPS).
held in trust until paid
to the United States
As you can see, the part of your employees’ wages that you do not give them is
Treasury.
actually their money. You should deposit these amounts on time for their benefit.
Postponing the tax deposit isn’t the same as using your own money to make a late
payment on your phone bill or to a supplier.
Congress established large penalties for employers that delay in turning over
employment taxes to the United States Treasury. The longer you delay paying that
money, the more it could cost you.
Employer:
“You earned gross
wages of $300 this
week.”
Employee:
“Here is the $30 for my income
tax, and the $23 for my social
security retirement and Medi-
care for you to send to the United
States Treasury. Be sure to send
your employer share of social
security and Medicare, too!”
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