Staying on top of your finances is one of the hardest things about being a business owner.
Part of that is calculating and paying your taxes the right way.
If you don’t know how to do payroll taxes correctly, you could be jeopardizing your business. Get these payments wrong, you could end up facing some steep fines as a result.
That’s why it’s crucial that you follow the right steps. Read on to find out what they are.
Four Tips on How to Do Payroll Taxes
Follow these steps to make your payroll process simple.
1. Complete W-4 Forms
The first step to learning how to do payroll by yourself is collecting all the necessary information about your employees. You can do that with a W-4 form.
The IRS requires all employees to fill out these forms so they can know exactly how much tax they need to withhold from their paychecks.
In this form, you’ll need to provide your employees’ gross pay amounts, as well as the frequency of their payroll schedule.
2. Do the Math
Find your employees’ wage bracket and payroll schedule in the IRS Employer’s Tax Guide. There, you’ll find instructions on exactly how to calculate their payroll taxes.
Once that’s done, you’ll also have to calculate the following additional rates:
Federal Unemployment Tax Act (FUTA)
Employers must pay a tax rate of 6% on the first $7,000 that each employee earns every year. This is paid throughout the year, rather than as a lump sum.
Federal Insurance Contributions Act (FICA)
This is used to pay for social security and Medicare.
The rate for social security is currently set at 12.4%, with 6.2% for the employer and the other 6.2% for the employee. For Medicare, it’s 2.9%, which is also split 50/50 between the employer and employee.
These rates are applicable to salaries up to $128,400.
To double-check your calculations, you can use the IRS Tax Withholding Estimator to confirm that you’re taking the right amount of tax out of each paycheck.
3. Make Your Payments
Once all your calculations are done, you can process your payments.
You’ll have to submit federal, state, and local tax deposits on behalf of all your employees. Do this every month to stay on top of them.
4. Get Some Extra Help
If this all sounds a little overwhelming, don’t worry. You can make the entire process much quicker and easier by outsourcing it.
When you opt for payroll outsourcing, you avoid the hassle of going through all the individual steps and calculations yourself. Instead, a team of experts handles it all in exchange for a fee.
If you don’t have the time or expertise to do your own payroll taxes, this might be the best option for you.
Take Your Busines to the Next Level
Now that you know how to do payroll taxes, you can set up a regular process that’s accurate and efficient.
Then, you’ll have more time to focus on how to grow and improve your business.
See more of our how-to guides to learn more quick solutions for technical problems at work.