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Tax Articles for small business owners and entrepreneurs
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Payroll Taxes Deductible From Employees' Paychecks - Know More Facts Starting your own company involves a lot of hard work and if you plan to hire employees to work for you, salary payment is an important aspect of the business. You need to be aware of the various laws of the land pertaining to the business apart from those relating to workmen's compensation. Knowledge is power and knowledge will help you to avoid costly mistakes leading to legal complications. One important factor pertaining to employees is the deduction of payroll taxes from the salary of the employee. There are various taxes to be deducted, before paying the employees. It is the duty of the employer to deduct certain taxes from the salary of the employee and pay to the government. The taxes thus deducted at source are retained in a separate account and paid to the government at the end of the financial year. The following taxes are to be deducted from the payroll check of the employee: 1. FICA Taxes: This tax is a fixed percentage of the salary and is uniform for all employees. These are social security and Medicare taxes and are deducted at the rate of 6.2% for social security and 1.45% for Medicare. This is the easiest tax calculation, because it is the same for all the employees. 2. Federal Taxes: The federal Taxes are more complicated for calculation as the deductions depend on many factors like the total income earned by each individual, his marital status, number of dependents, etc. 3. State Taxes: Apart from the above two types of Payroll taxes, there is a deduction towards the taxes levied by the state governments. The rates for tax deductions vary from state to state and include various other city or county levies. These taxes will depend on the state where your business is located. Once the payroll taxes are deducted from the paychecks of the employees, the accumulated amount is retained with the employer and it is paid to the government treasury at the end of the financial year. However, the overall tax deduction rates will depend on the state the business is operated. Calculation and payment of Payroll taxes is the company owner's commitment to the Internal Revenue Service. Deduction of payroll taxes is mandatory for all employers and there are no exceptions to the rule. Default in deduction of taxes on the part of the employer will attract penalties and fine. Even a mistake in the calculation of payroll tax will attract a penalty and you may end up losing a lot of money in fines. Therefore, it is crucial to be accurate in the calculation of payroll taxes for your employees as well as your company. Abhishek is a Tax Consultant and he has got some great tips on http://www.Taxes-Guru.com/777/index.htm> Filing And Understanding Taxes! Download his FREE 84 Pages Ebook, "Taxes Made Easy!" from his website http://www.Taxes-Guru.com/777/index.htm> http://www.Taxes-Guru.com/777/index.htm . Only limited Free Copies available. Article Source: http://EzineArticles.com/?expert=Abhishek_Agarwal |
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