Any business that has employees has to manage payroll taxes. Take Ronnie, assistant at Platinum Productions. Ronnie fills up an IRS W-4 to find out his federal income tax deductions on an annual income of $40,000. The company will follow the steps given below to compute Ronnie’s payroll taxes:
● Based on his W-4 deduction documents, Platinum production will deduct 25% of Ronnie’s gross pay for federal taxes and 5% for state taxes.
● Platinum production will file the tax amount deducted to the IRS and to Ronnie’s state revenue department.
● At the end of the year, Platinum production will issue a W-2 form to Ronnie, with details of the tax amount deducted from his pay.
Ronnie will include the W-2 forms while filing his personal tax returns. The W-2 gives details of the gross pay and the deduction of federal and state taxes.
Computing payroll taxes is tedious and time-consuming. It is best to hire a company to compute employee tax deductions. The company can be given access to the company bank account so that they can transfer the net pay to each employee’s bank account.
The company can also complete all required payroll tax forms and send the forms and tax payments to the IRS and the state revenue office. Hiring a payroll company will save a lot of time for your business.
Here’s A Lowdown on FICA and Medicare Taxes!An employer deducts the employee’s share of FICA and Medicare taxes from the gross pay and also pays the company’s share of the taxes.
Sole proprietors have to pay FICA and Medicare taxes using Schedule SE (self-employment tax) on their personal tax returns. Presently, sole proprietors pay taxes at the rate of 15.3% for FICA and Medicare taxes.
A half of these taxes are posted as a business expense on Schedule C. This allows the sole proprietor to reclaim the “business paid portion” of the taxes as company expense.
Yoel “Mo” Molina and I am a lifelong resident of Miami, Fl. I am a graduate of Miami Senior High, Class of 1992, Georgia Institute of Technology, B.S. 1997 and University of Maine School of Law, J.D. 2001. I have been practicing law in Miami Since 2001. I am a former training prosecutor in the Miami-Dade State Attorney’s Office. I have experience in jury trials, appeals, and administrative hearings. I have appeared before judges across the State. My experience ranges from civil litigation matters, collection matters, foreclosure, business and corporate, contracts, real estate, leases and employment matters..