Payroll Blog

Payroll Training, Tips, and News

Accounting Blog

Accounting Training, Tips, and News

Press Blog

  • basics-of-tax-withholding

    The Basics of Payroll Tax Withholding

    posted by Michele Bossart
    Newest Article
  • New laws for mandatory sick pay

    What Is California’s Sick Leave Law?

    posted by Michele Bossart
    Recent Article
  • The Basics of Payroll Tax Withholding

    Payroll tax withholding refers to an employer retaining part of an employee’s salary. The withheld amount is paid as tax directly to the IRS or other appropriate organization, like the Social Security Administration. Withholding lets the employee to pay taxes every month from each paycheck. Doing this reduces how much the employee might have to pay when they file their annual tax returns.

    The amount withheld is based on the employee’s income and other details, like exemptions, marital status and dependents. If the total amount withheld for the year is more than what the employee would have had to pay on their annual tax returns, the employee will get a tax refund.

    Who Requires Payroll Tax Withholding?

    The IRS typically requires withholding for federal taxes. Employees may also be subject to state, local and school taxes. The Social Security Administration also requires withholding from an employee’s income. Social Security helps the employee after their retirement and provides a paycheck of sorts after they reach a certain age.

    Another payroll tax withholding is for the Medicare program. This money, along with Social Security withholdings, is called Federal Insurance Contributions Act (FICA) taxes. Both the employer and the employee have to contribute to FICA taxes. Since all withholdings are made by the employer, the employee has no need to pay any of these taxes or fees directly. The employer must make sure that the payments are made on a regular basis so that they do not incur a penalty.

    Payroll Tax Withholding Exemptions

    Employees can claim applicable exemptions to reduce the amount of taxes withheld from their paycheck. The number of exemptions increases if the number of dependents increases or if one spouse loses their job. However, taking too many exemptions may not always be a wise choice. In the end, the amount of tax due at the end of the year may be more than what was withheld because the exemptions lowered their monthly withholdings too much. In that case, they will owe the IRS money. Conversely, if more money was withheld than the employee owed, they can receive a tax refund.

    Form W-4

    Employees who want to claim exemptions can apply for a payroll withholding allowance on Form W-4,  which they should get from their employer. People who get tax refunds from the government every year might consider filing for a withholding allowance, however, people who find that they have to pay a balance to the government each year should consider refraining from taking allowances.

    At the end of the year, employers should give a W-2 to all of their employees. The W-2 will list an employee’s total income as well as the total tax withholdings for the year.

    Exceptions to the Rule

    Contractors and freelancers do not have payroll taxes withheld throughout the year. They have to pay all of their taxes at once when they file their annual tax returns, unless they make quarterly estimated payments throughout the year. This can leave freelancers in a tough situation come tax season.

    Anyone who receives a 1099-MISC form instead of a W-2 needs to pay all federal, state and local taxes on their income. This includes paying both parts of the Social Security tax. Normally the employer would pay half of the Social Security tax, but since there is not an employer, the contractor must assume responsibility the whole payment.

    Do you need help calculating how much to withhold from an employee’s paycheck? With our Full Service Payroll, we will do the calculations for you. And we will even collect and file your payroll taxes, so there is less for you to worry about. Try it for free!

    What Is California’s Sick Leave Law?

    The Healthy Workplace Healthy Family Act of 2014 (AB 1522), along with its amendments (AB 304), changed how employee sick leave works. Effective July 1, 2015, the law affects current employers and employees in regard to earned paid sick leave. There are a few exceptions to the law, but the majority of all employers in California will now need to give their employees mandatory paid sick leave.

    Do I Have to Pay Self-Employment Tax?

    Self-employment is part of the American dream for many. To do what you love and get paid for it can be incredibly rewarding if handled properly. However, one of the factors that needs to be considered is self-employment tax — which is a necessary evil when you are doing what you love!

    Benjamin Franklin, whose face graces the U.S. hundred-dollar bill, once said, “In this world nothing can be said to be certain, except death and taxes.” While taxes may be a certain part of doing business and working, you may not be so certain about how to properly account for those taxes if you are self-employed…

    What is Social Security Tax?

    Social security, officially called the Old-Age, Survivors, and Disability Insurance (OASDI), is a system designed to help support those who are no longer able to work due to old age. It also supports widows/widowers and those who are disabled. To fund social security payments, every employee, employer, and self-employed person in the U.S. is required to pay social security tax. This tax is automatically withheld from every paycheck issued by an employer. It’s the employer’s job to make certain that the tax is remitted to the appropriate agency at the correct time.

    Understanding Exempt vs Nonexempt Employees

    As an employer, you will need to know the difference between exempt vs nonexempt employees. Employers need to categorize employees into appropriate groups based on their job duties and responsibilities. This will mainly affect payroll processing, as designating workers into these groups will have an impact on how you pay them and track the hours they work.

    Making Corrections on Form I-9

    What happens when you discover an error on a Form I-9?  It depends on the error.  The U.S. Immigration and Customs Enforcement (ICE) groups errors into two basic categories:  technical and substantive violations.  It is very important to know how to make corrections the right way. If during an ICE audit it is discovered that I-9’s were not corrected properly, civil money penalties and even individual charges of perjury and evidence tampering may result.

    How to Run Payroll: The Basics

    As a business owner, you are required to run payroll in regular intervals to compensate your employees for their time worked. How often you run payroll is predetermined by your employees’ pay dates, which normally are weekly, bi-weekly, semi-monthly, or monthly. You will want to run payroll a few days prior to the designated pay date in order to allow for processing time.

    Step One: Getting Ready to Run Payroll

    Employer: Before you can start running payroll, you will want to register your business with both federal and state organizations. This will

    Social Security Wage Base: What You Need to Know

    The social security wage base is used when determining the taxes you owe. Social security is a special type of tax that is withheld from all employees and self-employed individuals who are citizens of the United States.

    Why are social security taxes so important? Because social security taxes fund the trust that pays a living wage to those who are no longer able to work. This includes those who have reached retirement age, those who have lost their spouse and do not work, and those who are disabled. Without this tax, there would be no way to provide these benefits.

    W2 vs. 1099: Choose Wisely!

    It is easy to say W2s are for employees and 1099s are for independent contractors. The hard part is correctly deciding if a worker is an employee or a contractor. Unfortunately, it is not as simple as comparing apples and oranges. And the IRS penalties for misclassification can be steep, so you really want to get it right…

    What Are Nontaxable Wages?

    Nontaxable wages are wages given to an employee or individual without any taxes withheld (income, federal, state, etc.). However, most wages that you pay out to your employee(s) are taxable. So when are wages nontaxable?

    The IRS definition of a nontaxable wage and other tax-exempt income is fairly narrow.

    The Basics of Payroll Tax Withholding

    Payroll tax withholding refers to an employer retaining part of an employee’s salary. The withheld amount is paid as tax directly to the IRS or other appropriate organization, like the Social Security Administration. Withholding lets the employee to pay taxes every month from each paycheck. Doing this reduces how much the employee might have to pay when they file their annual tax returns.

    The amount withheld is based on the employee’s income and other details, like exemptions, marital status and dependents. If the total amount withheld for the year is more than what the employee would have had to pay on their annual tax returns, the employee will get a tax refund.

    Who Requires Payroll Tax Withholding?

    The IRS typically requires withholding for federal taxes. Employees may also be subject to state, local and school taxes. The Social Security Administration also requires withholding from an employee’s income. Social Security helps the employee after their retirement and provides a paycheck of sorts after they reach a certain age.

    Another payroll tax withholding is for the Medicare program. This money, along with Social Security withholdings, is called Federal Insurance Contributions Act (FICA) taxes. Both the employer and the employee have to contribute to FICA taxes. Since all withholdings are made by the employer, the employee has no need to pay any of these taxes or fees directly. The employer must make sure that the payments are made on a regular basis so that they do not incur a penalty.

    Payroll Tax Withholding Exemptions

    Employees can claim applicable exemptions to reduce the amount of taxes withheld from their paycheck. The number of exemptions increases if the number of dependents increases or if one spouse loses their job. However, taking too many exemptions may not always be a wise choice. In the end, the amount of tax due at the end of the year may be more than what was withheld because the exemptions lowered their monthly withholdings too much. In that case, they will owe the IRS money. Conversely, if more money was withheld than the employee owed, they can receive a tax refund.

    Form W-4

    Employees who want to claim exemptions can apply for a payroll withholding allowance on Form W-4,  which they should get from their employer. People who get tax refunds from the government every year might consider filing for a withholding allowance, however, people who find that they have to pay a balance to the government each year should consider refraining from taking allowances.

    At the end of the year, employers should give a W-2 to all of their employees. The W-2 will list an employee’s total income as well as the total tax withholdings for the year.

    Exceptions to the Rule

    Contractors and freelancers do not have payroll taxes withheld throughout the year. They have to pay all of their taxes at once when they file their annual tax returns, unless they make quarterly estimated payments throughout the year. This can leave freelancers in a tough situation come tax season.

    Anyone who receives a 1099-MISC form instead of a W-2 needs to pay all federal, state and local taxes on their income. This includes paying both parts of the Social Security tax. Normally the employer would pay half of the Social Security tax, but since there is not an employer, the contractor must assume responsibility the whole payment.

    Do you need help calculating how much to withhold from an employee’s paycheck? With our Full Service Payroll, we will do the calculations for you. And we will even collect and file your payroll taxes, so there is less for you to worry about. Try it for free!

    What Is California’s Sick Leave Law?

    The Healthy Workplace Healthy Family Act of 2014 (AB 1522), along with its amendments (AB 304), changed how employee sick leave works. Effective July 1, 2015, the law affects current employers and employees in regard to earned paid sick leave. There are a few exceptions to the law, but the majority of all employers in California will now need to give their employees mandatory paid sick leave.

    Do I Have to Pay Self-Employment Tax?

    Self-employment is part of the American dream for many. To do what you love and get paid for it can be incredibly rewarding if handled properly. However, one of the factors that needs to be considered is self-employment tax — which is a necessary evil when you are doing what you love!

    Benjamin Franklin, whose face graces the U.S. hundred-dollar bill, once said, “In this world nothing can be said to be certain, except death and taxes.” While taxes may be a certain part of doing business and working, you may not be so certain about how to properly account for those taxes if you are self-employed…

    What is Social Security Tax?

    Social security, officially called the Old-Age, Survivors, and Disability Insurance (OASDI), is a system designed to help support those who are no longer able to work due to old age. It also supports widows/widowers and those who are disabled. To fund social security payments, every employee, employer, and self-employed person in the U.S. is required to pay social security tax. This tax is automatically withheld from every paycheck issued by an employer. It’s the employer’s job to make certain that the tax is remitted to the appropriate agency at the correct time.

    Understanding Exempt vs Nonexempt Employees

    As an employer, you will need to know the difference between exempt vs nonexempt employees. Employers need to categorize employees into appropriate groups based on their job duties and responsibilities. This will mainly affect payroll processing, as designating workers into these groups will have an impact on how you pay them and track the hours they work.

    Making Corrections on Form I-9

    What happens when you discover an error on a Form I-9?  It depends on the error.  The U.S. Immigration and Customs Enforcement (ICE) groups errors into two basic categories:  technical and substantive violations.  It is very important to know how to make corrections the right way. If during an ICE audit it is discovered that I-9’s were not corrected properly, civil money penalties and even individual charges of perjury and evidence tampering may result.

    How to Run Payroll: The Basics

    As a business owner, you are required to run payroll in regular intervals to compensate your employees for their time worked. How often you run payroll is predetermined by your employees’ pay dates, which normally are weekly, bi-weekly, semi-monthly, or monthly. You will want to run payroll a few days prior to the designated pay date in order to allow for processing time.

    Step One: Getting Ready to Run Payroll

    Employer: Before you can start running payroll, you will want to register your business with both federal and state organizations. This will

    Social Security Wage Base: What You Need to Know

    The social security wage base is used when determining the taxes you owe. Social security is a special type of tax that is withheld from all employees and self-employed individuals who are citizens of the United States.

    Why are social security taxes so important? Because social security taxes fund the trust that pays a living wage to those who are no longer able to work. This includes those who have reached retirement age, those who have lost their spouse and do not work, and those who are disabled. Without this tax, there would be no way to provide these benefits.

    W2 vs. 1099: Choose Wisely!

    It is easy to say W2s are for employees and 1099s are for independent contractors. The hard part is correctly deciding if a worker is an employee or a contractor. Unfortunately, it is not as simple as comparing apples and oranges. And the IRS penalties for misclassification can be steep, so you really want to get it right…

    What Are Nontaxable Wages?

    Nontaxable wages are wages given to an employee or individual without any taxes withheld (income, federal, state, etc.). However, most wages that you pay out to your employee(s) are taxable. So when are wages nontaxable?

    The IRS definition of a nontaxable wage and other tax-exempt income is fairly narrow.