Payroll tax are taxes that employees have to pay that are deducted from their paychecks by the employer. Payroll deductions are known as withholding and are supposed to cover an employees tax liabilities for the year.
If you are new to business ownership you may be asking yourself what are payroll taxes & withholding rates. As part of the required payroll taxes for a business, you are required to pay unemployment tax for employees, which is called your FUTA and SUTA taxes, comprised of your state and Fed unemployment taxes for the year. FUTA is 6.2 percent of the first $7,000 paid for employee wages for the yr. SUTA taxes depend on the state you are located in, as each state has a different rate.
You can learn more about payroll taxes and withholding rates with QuickBooks online, as they provide an amazing free trial offer we suggest trying out.
Withholding Federal Income Tax for Employee Payroll Taxes
As an employer, you are required by the IRS to have your employees fill out Form W-4 and return to you, as this Form will determine the amount of payroll withholding’s for each employee. It figures the amounts for Federal taxes, state taxes and city taxes if applicable, based on employees residence.
The Social Security tax payroll deduction is half of FICA. The tax rate for SS tax is 6.2 percent of each employees salary with the employer also matching this amount. This tax is paid for employee wages up to $118,500, which means tax is not required above earnings of $118,500 for Social Security purposes.
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Payroll Video: IRS cracking down
Medicare Tax Withholding is the other half of employee FICA taxes. Thus, employers are required by law to withhold 1.45 percent of an employees salary for medicare taxes, as required by the IRS.
Payroll Tax Forms & State Payroll Taxes
State income tax payroll withholding depends on the state you are located in, as each state has a different rates and some states don’t have income tax. City and county income tax isn’t all that common for medium to small sized cities, as it’s designated for most large cities like NY city, Chicago, etc.
If you’re still asking yourself what are payroll taxes & withholding rates for my company. Most of the payroll programs out there will calculate all of the payroll taxes and withholding forms for you.
Again, QuickBooks has a free trial period for recording and submitting payroll taxes that is easy to use and will keep you in compliance with the IRS.