When a small business begins to hire employees, it is a significant milestone for that business owner. With that comes challenges like payroll taxes and business owners may find themselves needing help from a payroll service provider with their accounting needs. Payroll taxes are a common area where growing businesses begin to get confused.
Federal Insurance Contribution Act (FICA) Taxes
This tax cover both Social Security taxes and Medicare taxes. These taxes split responsibility between the employer and the employee. While they are grouped together, the two are paid individually. Social security taxes have a cap that keep the employees from earning over a certain amount. Medicare does not have a cap.
Additional Medicare Tax
For those that have a higher wage, an additional Medicare tax will need to be paid. While employers are required to deduct this additional tax from employees that meet the wage requirement, they are not required to match it.
Federal Unemployment Tax
If a business pays more than $1,500 to employees in a quarter, they are subject to this tax. This tax will also apply if they have a minimum of 1 employee for at least 20 weeks. This tax is paid by the employer for each employee that they have.
State Unemployment Tax
This tax is also paid by the employer but, if paid on time, they may eb able to receive a tax credit lowering their federal unemployment tax. In a few states, the employee also contributes to state unemployment tax.
State and Local Payroll Taxes
An employer may be required to pay additional taxes such as short-term disability, FMLA and other assistant programs, depending on where they employ people. It’s best to check with a local, licensed tax professional to ensure that you’re following all of the state and local tax requirements.
Master Plan Tax Solutions Can Help
At Master Plan Tax Solutions in Flower Mound, TX, we are dedicated to helping small business with all of their tax and financial needs. Whether you’re looking for help with your payroll, taxes or bookkeeping, our team stays up to date on all of the regulations, laws and requirements for businesses. Our values are rooted in honesty, accuracy, collaboration, insightful, and kingdom focus. If you’re a small business owner and need help with your financial responsibilities, give us a call today to learn more about how we can help you ensure financial success as you grow.