Obtaining The Employer Identification Number
Youre required to acquire the employer identification number if you plan to run a business that hires employees. Getting EIN can be beneficial even if youre not legally obligated to do so since a bank may ask for this number to open an account for your business.
State authorities in Texas dont issue employer identification numbers, and employers have to obtain this number from the IRS. You can apply for EIN online, via mail or fax, by submitting the SS-4 form. You should go through the instructions before you start filling out this form.
Also, you shouldnt apply for EIN before you complete the business registration process. EIN doesnt expire, so once this number is assigned to your organization, you will only be able to change it or obtain another one if the IRS determines that your business needs another EIN.
The process of acquiring this number usually lasts four weeks.
Paying Employees In Other States
If you operate in multiple states or just have employees working from home across a state line, it’s important to file the correct state forms for those workers. See what forms we file in the states where you pay employees.
Nothing in this article and/or information is intended or should be construed, as legal, tax or investment advice, or a legal opinion.
Need Help With Your Taxes
- Code for Americas Get Your Refund website: Visit Get Your Refund to connect with an IRS-certified volunteer who will help you file your taxes. First, you will upload your tax documents online. Then, an IRS-certified volunteer will call you to discuss, prepare, and review your tax return for filing.
- Volunteer Income Tax Assistance and Tax-Aide sites: VITA and Tax-Aide sites are IRS-sponsored programs that provide free tax preparation for those who earn less than about $56,000.
The deadline to file your taxes this year is April 18, 2021.
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Temporary Disability Insurance Tax
Employees pay this tax through payroll deduction to fund benefits for workers unable to work due to non work-related injury or illness. Employers are responsible for making the required deductions from their workers’ earnings and forwarding all TDI withholdings to the Employer Tax Section each quarter along with all required Employment Security, Job Development Fund and Reemployment Fund taxes.
Reporting Unemployment Benefits At The State And Local Level
If your state, county, or city collects income tax on your unemployment benefits, keep your Form 1099-G for reference. You may have to attach it to your state, county, or local income tax return. If so, keep a copy for yourself.
Check with your states Department of Revenue and relevant county and local government tax agency for instructions on how to report your unemployment benefits at the state and local level.
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What Else Do I Need To Know
It is important to note that Unemployment Benefits in Texas are taxable income. This means that you will have to report all the unemployment benefits you receive on your federal tax return at the end of a tax year.
However, you can ask the Texas Workforce Commission to take federal income taxes out of your benefits, and they will be able to withhold 10% of each payment that goes towards your taxes.
This is entirely up to you as the TWC will not withhold any benefits unless you choose the Withholding Option when applying.
Information You Need To Apply
You will need:
- Your last employers business name, address and phone number
- First and last dates you worked for your last employer. If you worked for your last employer on more than one occasion, provide the most recent employment dates.
- Number of hours worked and pay rate if you worked the week you apply for benefits
- Information about the normal wage for the job you are seeking
- Alien Registration number
- A valid Texas Driver License number or Texas Identification Card number
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Calculating The State And Local Payroll Taxes
As we already noted, Texas doesnt have state income taxes. Whats more, city and local governments in Texas dont require business owners to pay income taxes for their employees.
So, as a business owner in this state, youll only be required to cover federal payroll taxes and state unemployment insurance tax.
Cant Locate Your Twc Tax Account Number
To locate your TWC Tax Account Number:
If you are transitioning to Square Payroll from a different payroll provider , you can find your TWC Tax Account Number on any previously submitted quarterly tax filing . The TWC Tax Account Number is a nine-digit number in the following format: XX-XXXXXX-X.
If you need to update the TWC Tax Account Number we have on file for you, you can do so from the Tax Info tab in your online Square Dashboard.
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Rules For Unemployment Insurance Tax Liability
In Texas, most for-profit employers are liable for state UI taxes as soon as they have either:
- paid $1,500 or more in total gross wages in a calendar quarter, or
- at least one employee during 20 different weeks in a given calendar year regardless of the wages .
These are effectively the same rules that apply for liability under the Federal Unemployment Tax Act . Different rules, not covered here, apply to agricultural workers, domestic workers, and some non-profit organizations.
One piece of good news is that state UI tax payments generally can be credited against your FUTA taxes.
Ive Started Working Again But Not Full Time Can I Continue Getting Unemployment Benefits
If you are working fewer hours than you were prior to losing employment and applying for benefits, you may still qualify for partial unemployment. Attorneys with Texas RioGrande Legal Aid tell clients in this situation to continue requesting payments like normal, including their income and hours worked.
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If You Paid $10000 Or More For The Following:
- Sales/Use Tax
- Mixed Beverage Gross Receipts Tax
- Mixed Beverage Sales Tax
- Motor Vehicle Gross Rental Receipts Tax
- Natural Gas Producer
There are a number of ways to file/report:
eSystems is a secure portal for a variety of online transactions, including . Once you register and log into eSystems, you can access Webfile.
Final Paycheck Laws In Texas
When an employee quits or is terminated, its important to distribute their final paycheck in a timely manner. Legally, you have six days to process it if you terminate their employment. If the employee quits on their own, the deadline is the next regularly scheduled pay date. So whether thats in two days or two weeks, youll need to have a paycheck ready with all of the money you owe them.
Please note that even if any employee owes you money for a uniform they should have paid for or has a laptop they didnt return, you are not legally allowed to delay their final paycheck in retaliation.
If the employee who is leaving is a commissioned employee or believes theyre due a bonus, you must follow the written agreement. If it states you will be paying a bonus for work done in the first quarter, and theyre leaving in the second quarter, you are obligated to pay.
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Registering A Business In Texas
The first thing you need to do before hiring employees is registered your company with the Texas Secretary of State office. You can choose to register a sole proprietorship, partnership, corporation, or LLC.
The documents youll have to submit depend on the business structure you choose, and youll have to cover a $300 fee to set up a corporation or a $200 fee per partner to start an LLC.
You dont have to file organizational documents if youre registering a sole proprietorship or a partnership, but in some cases, general partnerships businesses may be required to provide a written partnership agreement.
Obtaining the necessary regulatory permits and licenses is a mandatory step of the business registration process. Authorities on county or the city levels issue these documents, and the permits and licenses youll have to obtain depend on the industry youre working in.
Moreover, youre required to apply for a professional or occupational license from the Texas Department of Licensing and Regulation, while all businesses that offer professional services must obtain the Certificate of Authority from the Texas Secretary of State.
Calculating The Payroll Tax
Once youve obtained the necessary documents from an employee, you can use the information they provided to calculate the tax withholding amount.
The tax authorities offer guidelines for each step of this process, so it shouldnt take you long to figure out how much of an employees salary should be deducted for taxes. Lets take a look at the steps you need to take to calculate the payroll tax.
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Running Payroll In Texasstep By Step Instructions
Running payroll in Texas is a little different from running payroll in other states, but its not typically extra work.
Step 1: Set up your business as an employer. Get your companys Federal Employer Identification Number . If your company is brand-new, you may need to apply for a FEIN. This is a simple process that can be completed online via the Electronic Federal Tax Payment System . If you work for a company that already has one, keep the FEIN handy. The FEIN is required to pay federal taxes.
Step 2: Register with the Texas Workforce Commission . You need to register online within 10 days of the first check date to get your TWC Account Number.
If you use a third-party payroll administrator, then you need to register them as your payroll administrator. Go to the TWC Unemployment Tax Services site and click on Sign up for User ID or log on. Once you are in, grant permissions to your payroll provider, being sure to assign Manage Wage Report permissions.
Step 3: Create your payroll process. If you work for an established business, you may have inherited a payroll process. But if your company is brand-new, you may need to start your payroll process, which means deciding how often youll be paying employees, when youll pay them, how youll track and calculate hourly employees work time, etc.
|For Wages Paid During|
State Vs Federal Taxation
Youll get even more relief if you live in a state that doesnt tax unemployment benefits. Otherwise, youll owe tax on your benefits to both the IRS and your state government.
As of 2020, the states that dont tax unemployment benefits are:
New Hampshire has an income tax, but only on investment income, so youll pay less tax if you live in that state, too. And two more statesIndiana and Wisconsinmay tax only a portion of your benefits, Capelli said, but he warned that some cities and counties have local income taxes that will apply to unemployment compensation as well.
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What Happens During The Appeals Hearing
Upon receiving the appeal, the agency sends a notice of a telephone hearing. That lists your hearing officer who amounts to the judge in the case. Legal representation is optional. You can have someone represent you, but the TWC does not provide a lawyer. You also may call witnesses, and your most recent employer may also appeal and participate in the hearing. The hearing officer has your documents in front of them and asks a series of questions, and you are provided an opportunity to lay out your case. Ahead of your hearing, the TWC recommends gathering the following materials to have on hand:
- Letters and memos.
- Maps, charts and diagrams.
- Performance record.
Angeline Stevens, the welding teacher in Dallas, appealed a TWC finding. She recommends having on hand a history of your pay stubs, termination letters and/or any written correspondence youve had with your previous employer.
Any of the relevant documents you want to present during the hearing must be provided to the hearing officer listed on your appeal hearing notice. The agency recommends sending relevant documents as far in advance as possible. You should not include documents already included in the hearing information packet.
What Can I Do If I Cant Pay My Federal Taxes
If you owe taxes and cant pay them in full, it is important to pay what you can and make a plan. Consider using a payment plan, but note that unless you pay the amount owed in full, you will be charged interest and penalties.
To learn more about your different payment options based on your financial situation, read What to Do if I Owe Taxes but Cant Pay Them.
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How To Do Payroll In Texas: What Every Employer Needs To Know
REVIEWED BY:Charlette Beasley
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
Heather is a staff writer and payroll specialist with several years of experience working directly with small business owners. Her expertise allows her to deliver the best answers to your questions about payroll.
This article is part of a larger series on How to Do Payroll.
Paying employees in Texas is a much easier process than youll find in other states. Theres no income tax, businesses arent required to purchase workers comp insurance, and employers only pay state unemployment taxes . There are some special laws concerning overtime and minimum pay frequency, but overall, Texas follows the federal regulations concerning business taxes.
If youre learning how to do payroll in Texas on your own and want to avoid being penalized for making mistakes, consider using Rippling. Rippling is an all-in-one HR platform that helps you onboard new employees, pay with direct deposits at no additional costs, and file payroll taxes. It even monitors tax laws at the federal, state, and local levels to ensure total compliance for your business.
File Scheduled Tax Reports And Payments
In Texas, UI tax reports and payments are due a month after the close of each calendar quarter. In other words, UI tax reports are due by the following dates:
For Wages Paid During
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Establish & Change Payment Options
When you apply for benefits, TWC offers you one of two ways to get your benefit payments:
- Direct deposit, which is direct payment into your personal checking or savings account in a United States bank or credit union
- Debit card, which is issued by the TWC-contracted bank
TWC will deposit payments to the TWC debit card account unless you sign up for direct deposit.
If you signed up for direct deposit on a prior claim, TWC will use the checking or savings account information you previously provided.
To select or change your payment option online or by phone:
- Log on to ui.texasworkforce.org and select Payment Option from the Quick Links menu.
Texas Unemployment Tax Report
You will need to file a quarterly wage report and pay unemployment taxes. You can do this by uploading a spreadsheet or manually typing it into the TWC system.
Per the TWC website, you need:
- The number of employees, both full time and part time, employed in the months covered by the wage report
- The Texas county where the greatest number of your employees worked
- The number of employees who worked outside the county you reported above
- A Social Security Number for each employee unique to that quarterly wage report
- Each employees last name and first initial
- The Texas wages paid to each employee for the quarter
- The wages paid to each employee and reported to a state other than Texas, if applicable
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Online Using Unemployment Tax Services
The Unemployment Tax Services system allows employers with 1,000 or fewer employees to file wage reports via the Internet. This free service provides four options for filing:
- Uploading a file
- Using an employer’s last report as a starting point
- Entering the wage details manually
- Submitting a No Wages report when an employer did not pay any wages in the quarter
You must have an employer account to use this option. For more information, see Unemployment Tax Service Online Wage Reporting. If you do not have an account, you will need to sign up for a User ID and then register. For more information, see Unemployment Tax Registration.