08 May How to Calculate and Report Your Employees Payroll Taxes
By: Diana Van Blaricom
Generally, employers report payroll by calculating gross monthly wage earning and then various payroll deductions to arrive at net pay. While this seems simple enough to understand, calculating various payroll deductions requires that the payroll accountant be detail oriented and work with extreme accuracy.
Statutory Payroll Tax Deductions
Payroll taxes must be withheld from an employee’s paycheck. This is required by law. Employers must hand these withholdings over to various tax agencies. Payroll tax deductions include the following:
- Federal income tax withholding (based on withholding tables in Publication 15)
- Social Security tax withholding (6.2% up to the annual maximum)
- Medicare tax withholding (1.45%)
- Additional Medicare tax withholding (0.9%) for employees earning over $200,000 (this is a new tax withholding requirement starting in the year 2013)
- State income tax withholding
- Various local tax withholdings (such as city, county, or school district taxes, state disability or unemployment insurance).