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 insurance premiums, life insurance, retirement contributions, union dues and other expenses related to the work.
Note that the voluntary deduction may be pre-tax dollars, or after-tax, depending on the benefit being paid for. You’ll need professional advice to understanding the distinctions and correct way to calculate these.
Don’t forget to reserve monies to cover the employer payroll tax responsibilities. As the employer, you are responsible for paying the employer’s share of the payroll taxes.
Modern Business Associates is an HR company that focuses on payroll and HR outsourcing. We routinely work with clients to figure payroll withholding taxes. As a Professional Payroll and HR outsource organization, our clients rely on us to help them effectively deal with these kinds of topics.
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