There a number of payroll deductions to consider such Federal Income Tax, Social Security, Medicare, State Income Tax and many others that I will go over in this article. You are required and mandated to withhold Federal income tax for all employees when recording your recording payroll deductions for 2016 & 2017 or you may face stiff penalties and interest. Make sure all employees complete Form W4 and submit to you for processing.
Social Security & Medicare Deductions
Currently, the Social Security tax rate is 12.4 percent. This amount is split between the employer and the employee, so each pays 6.2 percent. For Medicare the total tax rate is equal to 2.9 percent and again it is split up between the employer and employee, 1.45 percent for each.
QuickBooks is a top rated payroll program that offers a very easy to use free 30 day trial offer that we suggest checking out. They also provide additional detailed information related to recording payroll deductions.
State & Local Income Tax Deductions
In addition, several states have mandated disability programs which impose payroll tax responsibilities on employers. Not all states have state income tax but for those who do, employers to have payroll tax withholding. Further, keep in mind tax rates differ from state to state.
Employers in states with an income tax have state (and sometimes local) payroll tax withholding, payment and reporting obligations. Multi-state employment withholding may be governed by reciprocal agreements between states. http://maxmoneyzone.org/
Tutorial Payroll Deductions Video:
Typically employee pension, 401k and/or deferred comp is subject to tax withholding both Federal and State. Additionally, employer payments for profit sharing, stock bonuses, IRAs, endowments, and life insurance contracts are usually subject to tax withholding. Make sure such items are included in your employee withholding to avoid severe penalties and interest.
The free trial QuickBooks payroll luckily has all of the state tax rates already in the system and continuously updates any changes when recording payroll deductions for 2016 & 2017.
Most payroll systems such as QuickBooks online payroll has all of these withholding items implemented into their system which makes it easy when it comes time to prepare and process employee payroll.