Understanding Payroll Taxes
Professional Payroll Companies Break Down Tax Primer For Your Business
For small business owners, managing payroll can feel like a full-time responsibility, particularly when it comes to coordinating all your corporate tax requirements. The best way to stay on top of your payroll obligations is to team with experienced payroll companies. These consulting companies partner with their clients to break down the general tax primer and ensure they remain compliant at all times.
Tax Primer 101: Get The Basics
Consulting with qualified payroll companies to breakdown tax regulations deliver a wealth of information. Your chosen vendor will provide details for you in three specific categories: Taxes paid by employer. Taxes paid by employee. Taxes paid by both.
Let’s start with taxes that your staff members are required to pay through payroll. These generally fall into two categories:
Medicare was developed in the 1960’s as a health insurance option for people ages 65+ as well as individuals who suffer from various disabilities. In order to sustain this program, both you and your employees are required to pay in a specific percentage of earnings, based on overall salaries.
Social Security was created in the 1930’s and signed into law by President Roosevelt. Social Security’s primary purpose is as a resource for supplemental income for senior citizens. Like Medicaid, Social Security requires contributions from everyone to sustain itself. Every pay period, you and your team will donate 6.2% of total income up to predetermined amount.
Business owners have taxes designated for them alone. These include:
State & Federal Unemployment Taxes
Both state and federal unemployment taxes were set up to provide a buffer for unemployed workers looking for their next opportunity. State unemployment taxes vary from state-to-state; you can rely on are taxed at a flat 6% of wages up to a predetermined amount. However, prompt payment of FUTA often translates into a credit reduction percentage.
Employee Only Taxes
Your employees will also have taxes meant just for them. Much like your employer version, theirs will also be of the state and federal variety. These requirements include:
Federal Income Tax
The thought of keeping up with employee’s federal income tax stipulations is often enough to prompt business owners to work with qualified payroll companies. This employee only tax is based on a wide range of factors including total income, personal exemptions and filing status.
State Income Tax
Once again, the state dictates the percentage taken out of employees’ checks. Each state has an individual percentage, while some states forego income taxation entirely. Your payroll consulting team will break down the rules and regulations in the states in which you have employees to ensure that you remain compliant at all times with your payroll process.
Contact The Payroll Company Today
If you’re struggling to stay up-to-date with the latest tax regulations and requirements, The Payroll Company can help. Our team of payroll professionals work with your organization to ensure you remain compliant at all times with local and federal mandates. Want to hear more? Contact our team today!