Know how to calculate and pay the payroll tax and file your payroll returns

When you are running a business, it would involve a lot of hard work where you need to monitor many aspects of it. If you are hiring an employee then salary payment is the primary thing for any business. The payroll process for the salary payment is not simple, it involves various different aspects in it. Salary payments, calculation of the payroll tax, managing the provident funds, etc. are some of the important things in the payroll process. While operating a business in the USA, you need to calculate payroll returns properly as per the regulations. While handling the business payroll services, it is important to calculate the pay and payroll tax properly and file the payroll returns appropriately.

What are gross taxable wages?

The money that the employee earns is subjected to income tax withholding and/or FICA tax. This will not include the pre-tax deductions or taxable income under the taxable wages.

How to calculate payroll taxes?

When you calculate payroll returns, the payroll taxes will include self-employment taxes and FICA. If you want to learn to calculate payroll tax then you need to understand the two types of payroll taxes properly.

Here are the few taxes that need to be calculated:

1. Social Security tax rate

The social security tax rate for each employee is 6.2%. For example, the gross taxable wages of the employee is $1000 then the employee needs to pay $62 as tax. Further, these taxes have some criteria that exempt them from the payment of full taxes.

2. FICA tax

FICA tax is the employer and employee–paid taxes for the Medicare and Social Security taxes. The employee and the employer both pay the matching contributions of the taxes. These taxes ultimately go towards Medicare and Social Security taxes.

3. Medicare taxes

The employee has to pay 1.45% taxes for the wages they earn under the Medicare tax rates. The employer must also pay 1.45% as the matching contributions. The Medicare taxable wages do not have the wage base limit, here they need to pay 0.9% additional wages. The additional tax is based on the status of the filing.

Here are the criteria for filing:

– Single: $200,000

– Married filing jointly: $250,000

– Married filing separately: $125,000

4. Self-employment taxes

The self-employment tax is popularly known as Self-Employment Contributions Act (SECA) tax. These taxes are based on the criteria as per the threshold laid down under the rules and regulations.

Apart from the above main aspects, there are other criteria too which are considered to calculate payroll returns. It can be difficult for the employer to consider such vast and complex aspects of payroll taxes. It is better if the employer learn to calculate payroll tax. However, it is not possible for most employers, so outsourcing the business payroll services to experts can be beneficial.

Meru Accounting provides business payroll services for organizations. They have an expert’s team who are well-aware of the rules and regulations of the USA. They can relieve the employer from the complex task of filing payroll returns. Meru Accounting is a popular accounting service providing agencies around the world.


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