| If you own a small business and are looking for | | | | deduct the accompanying payroll taxes. |
| deductions, don't miss out on these. The first two | | | | 2. FUTA |
| you've probably heard about but don't really | | | | This stands for the Federal Unemployment Tax Act. It |
| understand (until now). The third one may seem | | | | represents the federal unemployment tax that all |
| far-fetched (pardon the pun) but is legitimate if the | | | | employers must pay out of their own pocket. The bad |
| circumstances described below fit your situation. | | | | news (for the employer) is that unlike FICA, employees |
| 1. FICA. | | | | contribute nothing to this tax. The good news is that |
| This acronym stands for Federal Insurance | | | | for most employers, FUTA ends up being a much |
| Contributions Act, which is legal-eze for the employer's | | | | smaller expense than FICA. It usually amounts to 0.8% |
| share of social security and Medicare tax. In 2008, all | | | | of the first $7,000 in wages or salary paid to each |
| employees must pay 6.2% of their first $102,000 in | | | | employee each year, or a maximum of $56/year. For |
| compensation (wages, salary, bonuses, etc) to the | | | | part-time employees who earn less than $7,000, you |
| federal government for social security tax. In 2009, | | | | end up paying even less. But don't overlook this one. |
| they will pay the same percentage to the first | | | | When it comes to taxes, every little deduction helps. |
| $106,800. This 6.2% is deducted from the employee's | | | | And even a "small" business can have 50 or more |
| gross wage, so while the gross wage is an employer | | | | employees, and if each of them has at least $7,000 in |
| expense, the social security deduction is not. | | | | annual wages, you're looking at a deduction of $2,800. |
| Medicare works somewhat differently in that the tax | | | | For an employer with 100 employees, your federal |
| rate is only 1.45%, but there is no limit to the amount of | | | | unemployment tax could exceed $5,000. |
| compensation subject to the tax. | | | | 3. FIDO |
| But the employer is obligated to match both the | | | | Fido is the name of a dog. What's that got to do with |
| employee's social security and Medicare withholding | | | | small business tax deductions? Well, isn't it possible that |
| amounts, and this is a deduction for the employer | | | | you have a dog that lives on the premises of your |
| because it doesn't come out of the employee's | | | | business? And could it not also be possible that this |
| paycheck. Instead, it comes right out of the employer's | | | | dog is not your pet, but rather a watchdog for the |
| pocket. | | | | business? If that's the case, then the cost of feeding |
| So don't miss this expense. It is common for small | | | | and maintaining the dog is a bona fide, and therefore |
| business owners to deduct the wages but forget to | | | | deductible, business expense. |