As a small business owner, both federal and state governments require you to withhold certain deductions from employee paychecks and submit them on a quarterly basis. For the federal government, you must withhold funds to pay the employee’s federal, Medicare, and social security taxes. You determine federal tax by the amount the employee earns as well as what he or she claims for exemptions.
The current rate of social security withholding is 6.2 percent for the employee as well as your company. That means your business pays 6.2 percent in social security taxes for every employee on its payroll. The same applies for Medicare taxes at a rate of 1.45 percent for employee and employer. This increases to 2.35 percent if the employee earns an annual salary greater than $200,000.
Options for Making Payroll Tax Payments
The federal government requires businesses to make their quarterly payroll tax payments electronically. The United States Department of the Treasury offers a free online electronic payment method called the Electronic Federal Tax Payment System for this purpose. You also have the option of initiating an automated clearing house (ACH) payment through your business checking or savings account. Your company’s bank will debit the money from its account on the same day that you request it.
The method of paying your state taxes varies depending on the state where you do business. Some will accept a check and payment voucher while others require electronic payments just as the federal government does. You can look up this information online or contact your state’s business taxation department to learn how to submit your quarterly payroll taxes.
Managing Your Payroll Taxes
One option your company has for calculating, managing, and paying its payroll taxes is to purchase and download software. This requires you to calculate the amount of taxes due for each employee as well as your company’s portion of taxes. You will need to keep current with tax rates at the federal and state level as well as social security and Medicare taxes. After inputting this information into your software program, it will calculate the amounts due and walk you through the process of making payments.
Hiring Palmetto Payroll to take over this task is often the more attractive option for busy small business owners. It frees them from having to devote time to payroll taxes themselves, as well as the obligation to hire a permanent staff member to handle this function. You simply provide payroll information for each of your employees and our company handles the rest. This includes payment of the federal and state unemployment tax. The current federal rate is 6.0 percent for a tax base of $7,000. As with other payroll taxes, the state rate varies depending on where your company is registered to do business.
You wear enough hats already as a small business owner. Accountant doesn’t need to be one of them when you let Palmetto Payroll take over your payroll taxes.