Running payroll is more than writing your employees a check.
You also have to make sure you’re correctly withholding taxes from your team
and tracking your tax liability, so you know how much to pay the IRS and your
state’s revenue department. Keep reading to learn the answers to your payroll
Every time you pay your staff, you will need to withhold
certain taxes from their checks.
Unless your employee is exempt, you’ll withhold federal and
state income tax. You’ll look at their federal and state W-4 forms to determine
how much to withhold.
You will also need to withhold Social Security and Medicare
taxes. Social Security is withheld at a flat 6.2% on the first $132,900 your employee
makes during the year. You’ll also have to match that amount. You’ll withhold
Medicare at a flat 1.45% on the first $200,000 your employee makes during the
year. If they make more than that a year, you’ll start withholding an
additional 0.9% in Medicare taxes after they’ve reached the $200,000 threshold.
As the employer, you will also have to pay 1.45% on your team’s wages.
Some cities and localities have additional taxes that you
might need to withhold. Talk to your local and state revenue departments to
make sure you’re withholding all required taxes.
Withholding taxes doesn’t have to be complicated. Run
payroll with Workful and let us calculate your tax liability for you. Request a demo with our sales team to learn more.
You’ll pay federal unemployment insurance tax (FUTA) on the
first $7,000 each of your team members earns. The FUTA rate is 6%, but
depending on your state, you will likely only have to pay 0.6% due to a tax
Each state determines its own unemployment insurance rates
and sets its own requirements. Your state will typically notify you of your initial
rate when you register your business. Your rate may change annually, as it’s
determined by your industry, how long you’ve been in business, and how many
unemployment claims your former employees have made.
Unemployment insurance is typically only paid by the
At the end of the year, you will need to file a W-2 for every
employee you paid during the year. If you paid any independent contractors, you
will need to file 1099-MISC forms for them. Your workers will use the
information provided on the forms to file their own income tax returns.
You will need to file Form 940: Employer’s Annual Federal
Unemployment (FUTA) Tax Return by January 31 of each year. This form lets the
IRS know how much FUTA taxes you paid throughout the year and helps determine
if you still owe anything.
You will also likely have to file Form 941: Employer’s
Quarterly Federal Tax Return. This form is due at the end of every quarter and
tells the IRS how much you paid your employees and withheld from their
paychecks. If your annual tax liability is $1,000 or less, you might file Form
944: Employer’s Annual Federal Tax Return at the end of each year instead.
You will also need to file state payroll forms. Each state
has forms to file to let them know how much you paid your team, how much taxes
were withheld, and how much you’ve paid in unemployment taxes.
6. When do I pay my payroll taxes?
The IRS and your state will assign you a tax deposit
schedule. The easiest way to make your federal tax payments is through the Electronic Federal
Tax Payment System (EFTPS). Check with your state to learn the best
way to submit your state tax payments.
If your tax liability for the current or previous quarter is
less than $2,500, you’re likely a quarterly depositor and will remit your taxes
when you file your Form 941.
If your tax liability for the lookback period was $50,000 or
less or if you’re a new employer, you’re likely a monthly depositor. You will
submit your payment by the 15th of the following month. For example,
you will pay your May tax liability by June 15.
If your total tax liability for the lookback period was
$50,000 or more, you’re likely a semi-weekly depositor. If your payday is
Wednesday, Thursday, and/or Friday, you will pay your taxes by the following
Wednesday. If your payday is Saturday, Sunday, Monday, and/or Tuesday, you will
pay your taxes by the following Friday.
If you accumulate $100,000 or more in tax liability on any
payday, you must deposit the taxes by the next business day.
States often use a similar method to determine when you need
to pay your taxes. Check with your state’s revenue department to learn when to remit
your payroll taxes.