Employee payroll taxes are made up of Federal and state income tax, Social Security taxes and Medicare taxes. Similar, employer include Federal unemployment and State unemployment taxes, social security taxes and Medicare taxes.
Payroll Taxes for Small Businesses
Payroll taxes are just a part of life for small businesses out there and the costs can add up quickly. Employer Payroll Taxes for 2016 & 2017 have a number of Federal and State rules and regulations that must be adhered to. Payroll taxes are imposed by the Federal government to support various program such as the Social Security agency, medicare and many other various social insurance benefits to provide support US citizens.
Further, Federal income taxes support a number of Federal programs such as the Dept of Defense and overall security for the US. State income taxes cover a large number of programs such as education, transportation, prison systems, law enforcement and parks and rec. Failing to remain in compliance with all employer payroll taxes for 2016 & 2017 can be costly when you start to include penalties and interest to Federal, State and local governments.
Most of the payroll systems out there like QuickBooks online small business payroll keeps you in full compliance with all payroll rules and regulations to avoid various fines.
Payroll Tax Rates
The Social Security tax rate is equal to 12.4% and is split between the employee and employer equally. The cap on this tax is $118,500 for current employer payroll taxes. Additionally, Medicare taxes total 2.9% and are equally split between employer and employee. State unemployment taxes for employers vary state to state.
Keep in mind that if your state does levy tax you must have each employee complete a W-4 which can be found on the IRS site to determine how much you need to withhold for Federal tax purposes. Employers who fail to pay their portion of these payroll taxes typically get hit with strict fines from the Government and sometimes can be put out of business.
The following states don’t levy payroll taxes:
Employer Payroll Tax Video:
QuickBooks online offers a free trial period for employee payroll that we highly recommend taking a look it, as it completes all the payroll calculations correctly to remain in full compliance.