Have all your SUTA questions answered in just a 3 minute read. You can find out more about payroll tax in your state and local area there. Payroll tax is complex. The calculations are nitpicky and penalties are steep. We highly recommend outsourcing your payroll to a company like Gusto. When it comes time to record payroll costs on your books, Bench can take care of that for you.
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Get started with a free month of bookkeeping. This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein. Sign up for a trial of Bench.
No pressure, no credit card required. For Partners. Tired of doing your own books? Try Bench. In two separate blog posts, we will dive into several important issues: what payroll taxes are exactly, who pays them, how effective they are, and some of the controversy that surrounds them. This blog post covers the first two topics, while the next will cover the latter two. Put simply, payroll taxes are taxes paid on the wages and salaries of employees. These taxes are used to finance social insurance programs, such as Social Security and Medicare.
According to recent Tax Foundation research , these social insurance taxes make up The first is a Half of payroll taxes 7. Perhaps one of the best-kept secrets of payroll taxes is that employees effectively pay almost the entire payroll tax, instead of splitting the burden with their employers.
This is because tax incidence is not determined by law, but by markets. In fact, the person who is required to pay a tax to the federal government is often different than the person who bears the tax burden. The graph below roughly illustrates how the labor market distributes the payroll tax burden. At the end of the year, you must prepare and file Form W-2, Wage and Tax Statement to report wages, tips and other compensation paid to an employee.
Employers generally must withhold federal income tax from employees' wages. To figure out how much tax to withhold, use the employee's Form W-4, the appropriate method and the appropriate withholding table described in Publication T, Federal Income Tax Withholding Methods.
You must deposit your withholdings. The requirements for depositing , as explained in Publication 15, vary based on your business and the amount you withhold. An employer generally must withhold part of social security and Medicare taxes from employees' wages and the employer additionally pays a matching amount.
You must deposit the taxes you withhold. See requirements for depositing. The employee tax rate for social security is 6.
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