We'll cover the things most people miss about payroll taxes. And, we’ll teach you how to calculate the payroll taxes themselves.
Each pay period, employers are required to withhold certain amounts of money––known as payroll taxes––from their employees’ paychecks. Then, employers give this money to the government. It might sound complicated, but it isn’t: If you’ve ever sent or received a check with things like “Social Security” and “Medicare” deducted, you have experience with payroll taxes.
Below, we’ll cover the things most people miss about payroll taxes. And, we’ll teach you how to calculate the payroll taxes themselves.
There are two types of calculations here: FICA taxes and income tax. When people think of payroll taxes, they’re usually referring to FICA taxes––so we’ll start with those:
For example: If an employee made $1,000 in a pay period, you’ll deduct $76.50 from their paycheck. 6.2%, or $62.00, of that deduction is for Social Security. The remaining 1.45%, or $14.50, is for Medicare.
Aside from Social Security and Medicare, you’ll likely also withhold income tax from your employees’ paycheck. The process here depends entirely on the employee.
Here’s how it works:
1. Your employee fills out, and delivers, a completed Form W-4 that gives you information about exemptions and withholdings. The employee can also direct you not to withhold any income tax from their paychecks.
2. You use this information to withhold income tax from your employee’s paychecks. It’s on the employee, not you, to make sure the withholding information is correct.
If you don’t know: Not every employee gets their W-4 in on time. If you don’t know what to withhold, the IRS instructs you to withhold taxes as if your employee were single with no other adjustments.
You can learn more about the Form W-4 process in our article here.
Payroll tax requirements change by country. It can be a headache. But we spend our days working on that headache and making the global hiring process an easy one for you. With Panther, you can hire people in most parts of the world in just a couple of clicks.
This isn’t a QVC infomercial, so we’re not going to tell you that you’ve got to use our services now or ever: But if global compliance and payroll sounds interesting, you can learn what we’re all about here.