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Written by Editor
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Saturday, 13 August 2005 |
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Payroll Taxes
All employers are required to withhold taxes from employees’ paychecks and then send those funds to the proper government agencies. The employer also has to pay certain taxes like FICA, federal unemployment, and state unemployment taxes. The employer also has to withhold social security and Medicare taxes from employees’ wages and pay a matching amount. You can visit the Social Security Administration’s Web site to find out about the five major benefits covered by Social Security taxes (retirement, disability, family benefits, survivors, and Medicare).
Finally, some employers have to pay taxes under the Federal Unemployment Tax Act (FUTA). This credit cannot be more than 5.4% of taxable wages. Those entitled to the maximum 5.4% credit have an effective FUTA tax rate of 0.8% after the credit. In order to find out whether or not your business will be required to pay a FUTA tax, you have to contact the IRS.
Additionally, the employer will have to pay state unemployment taxes and these funds cannot be deducted from the employee’s wages. The amount taxed varies from state to state.
If your payroll varies each pay period because you have employees that are paid by the hour or because your employees earn commissions, it may make sense to hire a payroll service, which will calculate each paycheck, including tax obligations, print the check, and give you payroll reports. This way, you can avoid any costly mistakes in payroll processing.
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