Payroll Tax FAQ
Payroll accounts have an importance of their own when it comes to your business and so it becomes mandatory to manage them appropriately. Payroll taxes are all the more important to be managed in a proper manner. Payroll taxes have to be accurate and must be paid on time whether you own a small enterprise with a few employees or a large one with several employees. There are certain questions that businesses tend to have at the back of their minds with regard to these taxes. The primary motive behind these questions is that business owners want their accounts to be void of any potential irritant. Let’s have a look at some of the frequently asked questions related to payroll taxes.
Q: What are payroll taxes?
A: Enterprises with employees are required to deduct certain amount of money from the salaries of their employees. This is the money that is withheld to pay federal and state income taxes, unemployment, social security and Medicare taxes. The taxes that are deducted from the salaries of employees are called as payroll taxes. The employer also has to contribute his own share to the payroll taxes along with withholding them from the remuneration of the employees.
Q: How are payroll taxes paid?
A: It is very important for a business to be acquainted with the process of payment of payroll taxes. Payments are made electronically when it comes to federal taxes. You can use the Electronic Federal Tax Payment System (EFTPS) which is a free of cost method of paying taxes online that has been devised by the US Department of Treasury. ACH Credit payments from the business owner’s bank also have to be arranged. The method of paying payroll taxes at the state level tends to vary. However, there are a few state level taxes that can be filed electronically as well. Businesses can hire an outsourced accounting service and leave everything up to them regarding the payment of payroll taxes.
Q: What is the best way to handle payroll taxes?
A: Business owners have to determine the methodology with which they intend to deal with payroll taxes. They can hire a virtual bookkeeping service or install or download a payroll management software. The user still has to calculate the taxes via the software which are extracted from the worker’s gross salary, their state, federal and local taxes and the amount withheld in terms of their social security benefit and Medicare deductions. These are also known as Federal Insurance Contributions Act or FICA deductions. A business owner also has to determine his or her contribution to the payroll taxes.
Q: How should I calculate my payroll taxes?
A: The most important aspect about payroll taxes is their calculation. This can be accomplished by getting acquainted with the existing state and federal rates of taxes. You will also have to be familiar with the existing federal FICA deduction rates. These are determined against an employee’s gross salary as a percentage of the employee’s remuneration.
Q: What are existing payroll tax rates?
A: Existing payroll tax rates for social security are 6.2% for both the employer and the employee. The tax rate for Medicare for both the employer and employee is 1.45%. An additional 0.9% is also withheld when a worker’s annual salary exceeds $200,000. The Federal Unemployment tax rate is 6% which is applicable to the federal salary base of $7,000. State payroll taxes vary from one state to another.