Are Payroll Insurance Premiums Taxable in My State?

HIghlights:

 

  • Are Payroll Insurance Premiums Taxable in My State?
  • Basic Payroll Tax Information for Employers
  • Payroll Deductions
  • Employer Payroll Tax Responsibilities
If you’re asking yourself, “Are payroll insurance premiums taxable in my state,” then you understand the importance of staying up to date with state regulations and how they apply to your business. To find state-specific resources to answer that question, click to the following page, find your state, and search for “tax deductions.”
 
 
Some additional basic payroll tax information is located below.
 

Basic Payroll Tax Information for Employers:

 
In general, to arrive at net pay, employers report payroll by calculating gross pay and various payroll deductions. Payroll deductions need to be done with extreme accuracy. The basic formula for net pay is as follows:

* Employee’s gross pay - minus statutory payroll tax deductions – minus voluntary payroll deductions

Statutory Payroll Tax Deductions – As required by law, payroll taxes are always withheld from employee paychecks. These withholdings are given to various tax agencies. Deductions include the following:
  • Federal income tax withholding
  • State income tax withholding
  • Social Security tax withholding
  • Medicare tax withholding
  • Other miscellaneous local tax withholdings (including city, county, or school district taxes, as well as unemployment insurance or state disability)
 
Voluntary Payroll Deductions – These are withheld from paychecks if the employee has agreed to such deduction. These can be paid with pre-tax or after-tax dollars. Professional payroll software will help you keep track of all tax-related payroll calculations. Voluntary deductions include the following:
  • Health insurance premiums (medical, dental, and eye care)
  • Life insurance premiums
  • Retirement plan contributions
  • Employee stock purchase plans
  • Uniforms, meals, union dues or other job-related expenses
 
Employer Payroll Tax Responsibilities – Companies are responsible for payroll taxes to employees, for depositing tax dollars that are withheld from paychecks, accounting for payroll expenses and for filing payroll tax returns.
 
Employer Payroll Taxes – Companies must pay their portion of payroll taxes. They are an additional expense to the employee’s gross pay. Payroll taxes for the employer portion include:
 
  • Federal unemployment taxes
  • State unemployment taxes
  • Social security taxes
  • Medicare taxes
 
FICA Taxes – The Federal Insurance Contributions Act (or FICA) includes Social Security and Medicare taxes. Employees pay half and employers pay the other half of these taxes.
 
Reporting Payroll Taxes – Employers must report their payroll taxes and deposit them in an efficient manner as follows:
 
  • Wage and Tax Statements (Form W-2)
  • Federal unemployment tax return (Form 940 or 940EZ)
  • Make Federal tax deposits
  • Yearly return of withheld Federal Income Tax (Form 945)
 
Employers must also file reports with various state and local agencies. Visit the American Payroll Association website for links to state tax agencies.
 
 odern 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.