What is a payroll system?   As a payroll outsourcing company, many times when we sit down with clients, they initially ask “What is a payroll system?” This is a great starting place for planning how your payroll system will, at a minimum:   Gather your employee work hours Cut checks Stay in compliance with taxes and withholdings on a federal, state and local level.   Companies generally handle creating their payroll system in a few popular ways:   You can have employees fill out time cards and use your internal accounting staff to handle all checks. While this is a popular strategy, pay attention to some of the shortfalls of this system: It usually doesn’t scale easily as you grow your business It can be unmanageable to keep the accountant up-to-speed with state and federal withholdings and compliance issues You’re dependant on one person for your system. This makes the person very hard to replace if the need should arise for any reason.  ...

  Figure payroll withholding taxes To figure payroll withholding taxes, just follow this guide of steps to take and links to resources. Employees’s Gross Pay Minus Required Payroll Tax deductions (including any voluntary deductions) What’s left is the net pay.     Required Payroll Tax Deductions   Since the payroll taxes have to be withheld from your employees’ paychecks, it’s important to understand the different kinds of mandatory withholdings: Federal Income Tax (based on the withholding tables based on the Fed’s Publication 15) Social Security tax withholding (6.2%, up to the annual maximum for that employee) Medicare Tax (1.45%) Any applicable state income tax Any applicable local tax withholdings (like state unemployment insurance, city, county, state disability)   Voluntary Payroll Deductions Voluntary payroll deductions are ones where the employee has previously agreed to the deduction. These include health insura ...

  Employer’s portion for payroll taxes     After paychecks are sent to employees, your work is only half done. Here’s and explanation of, and how to calculate, the employer’s portion for payroll taxes. These employer taxes are above and beyond your employees’ gross pay.   The employer’s portion for payroll taxes includes these elements: Social Security (6.2% up to the annual maximum per employee) Medicare Taxes (1.45% of wages) Federal unemployment taxes (FUTA) State unemployment taxes (SUTA)   Note: Social Security and Medicare Taxes are commonly referred to as FICA taxes (Federal Insurance Contributions Act). These are paid for by both the employers and the employees in identical contribution amounts.   In addition to covering the employer’s portion for payroll taxes, read our other article to figure payroll withholding taxes.    Modern Business Associates is an HR company that focuses on payroll and HR outsourcing.  As a Profe ...

Health Reform Bill HR3590 Update - Simple Cafeteria Plans

The American Society of Pension Professionals & Actuaries published an article summarizing "Simple Cafeteria Plans" that are available starting January 1, 2011, under the health reform bill (HR 3590).  Please use the link below to access:

 

http://www.asppa.org/Document-Vault/PDFs/ASAPs/2010/10-13.aspx

 

Tax credits mean good news for employers!    On March 18, 2010 President Obama signed into law the Hiring Incentives to Restore Employment Act (HIRE Act).  The HIRE Act carries two significant tax incentive components for employers:  a Social Security tax forgiveness and a retention tax credit.  The first starts immediately for employers hiring qualified employees through the remainder of 2010 and the second can be earned by employers who retain qualified employees for a minimum of 52 consecutive weeks.  The following is an overview of how both incentives work.   Social Security Tax Forgiveness: Employers will receive a 6.2% Employer Social Security Tax Exemption on wages paid to “qualified employees” after March 18, 2010 and before January 1, 2011, up to the Social Security maximum of $106,800.  The maximum credit per qualified employee is $6,621.  To be a qualified employee the new employee must: ·     &# ...

Payroll deductions should include state income tax and payroll insurance deductions As a Professional Employee Organization, our clients ask us to handle their payroll responsibilities including two of the most talked about deductions: their state income tax and payroll insurance deductions. The state income tax is part of the statutory payroll tax deductions. As required by law, statutory Payroll Tax Deductions are payroll taxes that must be withheld from your employees paycheck. You must hand these withholdings over to the multitude of tax agencies on all levels of government. Local tax withholdings (city, county, or school district taxes, state disability or unemployment insurance). State income tax withholding Federal income tax withholding Social Security tax withholding Medicare tax withholding The payroll insurance deductions are part of the Voluntary Payroll Deductions Voluntary deductions pay for various benefits which the employee has chosen to parti ...

Employer Payroll Taxes – How to stay out of trouble Many growing companies have questions like, “How do employer payroll taxes work?” At Modern Business Associates, many of our small clients come onboard with our payroll processing to let us handle their entire payroll processing burden, which includes payroll taxes. Our systems are set up to ensure your business does not get into trouble by missing withholdings or taking the wrong amounts. As background, you should know that employer payroll taxes are the state and federal taxes that you, as an employer, are required to withhold and/or to pay on behalf of your employees. After having each new employee complete their IRS form W-4, we’ll use this information to calculate the amount of federal income tax to withhold from the employee’s wages. Most all of the states have income tax structures that are based on the federal blueprint, so you will use the same W-4 to calculate the amount of state income tax to withhold as well.   You ar ...