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Figuring out Payroll Taxes

    • 2 posts
    November 6, 2012 12:39 PM EST

    In order to determine the tax rate (basis) for each employee, a W-4 is required to be completed prior to the issuance of the first payroll check. This form can be downloaded at no cost at www.irs.gov. In addition, an I-9 is also required and this can also be downloaded at no cost at www.uscis.gov

    2 proofs of identification are required to verify the identity of the person completing the tax forms. The rate for Social Security withheld is 6.2% and Medicare withheld is 1.45% for a total of 7.65%.  The employer matches the medicare portion and contributes an additional 1.45% but receives a deduction in the Social Security contribution of 4.2%, totaling 5.65%. Federal Unemployment (FUTA) is taxed at 6.0% of the first $7,000 of wages earned per employee per calendar year. State Unemployment rates (SUTA) vary by state, the nature of business conducted, and the statistical likelihood of former employees receiving unemployment on  the employer. These are factors that any employer must consider when taking into account the payroll expenses of the business. Workmans Compensation Insurance is required in each state as well, and this should also be taken into account when considering the overall cost of payroll. A payroll professional can advise you of the laws in each state as well as the federal laws.

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    • 52 posts
    April 9, 2007 1:19 PM EDT
    How do I do it? I`m finishing a business plan and I need to know just how much we intend to pay in payroll taxes? Is there a base percentage I just tax each employee?


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    Collin Cummings
    President, Drop Box, LLC
    dropboxmail@gmail.com

    • 52 posts
    April 9, 2007 1:43 PM EDT
    Okay, I figured out that it`s 6.2% for Social Security tax, 1.45% for Medicare, but the Federal and State Unemployment Taxes are unclear. Is there a general percentage I can apply to the payroll projection to see what we`re going to pay in taxes?

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    Collin Cummings
    President, Drop Box, LLC
    dropboxmail@gmail.com

    • 88 posts
    May 23, 2010 7:41 AM EDT

    Taxes differ in States. You should try incorporating that after researching the tax rate of your state.

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    Seo Consultant | Cure Autistic Adults | Industrial For Rent | Business Park

  • April 9, 2007 2:41 PM EDT

    Federal, State, and Disability taxes are employee paid.  You do not have to match it.  They also pay the 6.2% FICA and 1.45% Medicare just like you do.

    You will have FUTA to calculate at .8% but it`s only paid on the first $7,000 worth of earnings PER employee.

    Depending on the state you live in, there may be employer contributions to ETT and SUI.  New businesses in California are usually at 1% for the Training Tax [ETT] and, until they`re rated, start at about 3.4% for the Unemployment Tax [SUI].

    Don`t forget workers compensation.  You can find information on rating by going to http://www.wcirb.com

    If you need help, let me know.  It`s what I do.

    Good luck.