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  • understand-taxable-wages-before -completing-form-1040

    Understanding Taxable Wages

    posted by Michele Bossart
    Newest Article
  • report-third-party-sick-pay-as-it-affects-taxes

    What Is Third Party Sick Pay?

    posted by Mike Kappel
    Recent Article
  • Understanding Taxable Wages

    When preparing your taxes or doing any paperwork that concerns income, you may see the term taxable wages or taxable income. As the term implies, not all your wages may be taxable. So the amount of income to be reported can actually be less than your total income. As an employer, you will need to understand the concept of taxable wages for tax purposes.

    What Is Third Party Sick Pay?

    Do your employees receive third party sick pay? If so, it is most likely payment for missed hours of work that qualified as short- or long-term disability. It is also likely that an insurance provider made those payments. If you are using a third party for sick pay, it is important to understand your responsibilities for reporting the sick pay and for paying any taxes.

    In many cases, employers add sick pay to their employees’ checks and there is no third party. These payments take the place of a regular salary when the employee is sick, injured, or otherwise temporarily disabled and unable to work. Sick pay is included in the employee’s gross wages for income taxes.

    However, there are some conditions in which a third party — not your business — provides the sick pay as a type of insurance benefit. The amount of third party sick pay is usually calculated as a percentage of what the employee would have been paid for actually working that same pay period.

    What Is Common Law Employment?

    Common law employment is a legal term meaning any type of employment where the employer controls the work being done and how that work is done. This vague definition is one reason many court cases have been brought concerning common law employment. Over the years, court rulings in these cases have helped redefine and shape what is and what is not considered common law employment.

    How to Calculate Local Income Tax

    Nearly 5,000 different jurisdictions in 17 states have some form of local income taxes. In Ohio, a large number of cities (almost 600) and school districts (almost 200) impose a local income tax, and in Pennsylvania, nearly 3,000 municipalities and school districts combined have some form of local income tax. While this type of tax is more common in the Rust Belt states, all counties in Maryland and Indiana now have a local income tax, as well as some school districts in Michigan and Iowa.

    Do you owe local income tax?

    Depending on where you are, the tax rates vary, and some taxes change on a regular basis. In fact, some local taxes may be temporary and designed to raise funds for specific purposes, while others are permanent and help fund the city’s operating budget. Some taxes are limited and are either not reported as local income taxes or account for less than 0.01 percent of an employee’s personal income. Most local taxes range from around 1 percent up to around 3.2 percent, but most do not exceed that amount.

    What Is the EEO-1 Report for Employers?

    Federal employment law requires certain U.S. employers to submit an annual EEO-1 Report, which is a count of all employees, ordered by job category, ethnicity, race, and gender. Employers must submit the report to the U.S. Equal Employment Opportunity Commission’s (EEOC) Joint Reporting Committee.

    What Is State Reciprocity?

    Here’s a tricky question: when a person lives in one state but works in another, to which state should the employee owe state income tax?

    After all, both states may have a claim to the tax, but it certainly isn’t fair to tax the employee twice.

    What is Employer Withholding?

    A young employee’s very first paycheck can come as a shock. After all, they were hired for a specific hourly wage or monthly salary. Then their paycheck arrives, and it’s much less than expected.  That’s because of employer withholding — their employer is legally required to withhold a number of different taxes and other payments from their gross pay.

    What Are Regular Hours?

    The term “regular hours” can mean several different things, but most often refers to the usual hours that employers expect their employees to work.  When an employer runs payroll, they usually must select from several different hours types: regular hours, overtime hours, holiday hours, etc.

    What Are Payroll Liabilities?

    Payroll liabilities are any type of payment related to payroll that the company owes, but has not yet paid. Payroll liabilities can include taxes withheld from employees, such as federal and state income tax, Social Security, and Medicare, as well as other items such as union dues, health insurance contributions, 401k retirement fund contributions, and wage garnishments.

    The most common payroll liabilities are the taxes that make up an Employer’s 941 deposit. Employers are required to withhold federal, state, and local income tax from most employee paychecks, as well as Social Security and Medicare taxes which the employer matches. Most employers remit these payroll liabilities on a monthly schedule using the Electronic Federal Taxpayer System (EFTPS).

    An Overview of State Income Tax

    Employee wages are often subject to two different types of income tax withholding: federal income tax and state income tax. State income tax funds a variety of different state projects and programs, including K-12 and higher education, Medicaid and health care, corrections, public assistance, and other needs, according to the National Association of State Budget Officers. 

    Most states impose individual income taxes, except for seven states that do not. Two states have limited state income taxes.

    Individual Income Tax
    There are 41 different states with individual income taxes. These state tax amounts are withheld by their employers before they receive their net pay. Tax rates vary and may change depending on the state’s need. States with individual income tax may offer specific deductions for individuals, although there are different limits on these deductions.

    Understanding Taxable Wages

    When preparing your taxes or doing any paperwork that concerns income, you may see the term taxable wages or taxable income. As the term implies, not all your wages may be taxable. So the amount of income to be reported can actually be less than your total income. As an employer, you will need to understand the concept of taxable wages for tax purposes.

    What Is Third Party Sick Pay?

    Do your employees receive third party sick pay? If so, it is most likely payment for missed hours of work that qualified as short- or long-term disability. It is also likely that an insurance provider made those payments. If you are using a third party for sick pay, it is important to understand your responsibilities for reporting the sick pay and for paying any taxes.

    In many cases, employers add sick pay to their employees’ checks and there is no third party. These payments take the place of a regular salary when the employee is sick, injured, or otherwise temporarily disabled and unable to work. Sick pay is included in the employee’s gross wages for income taxes.

    However, there are some conditions in which a third party — not your business — provides the sick pay as a type of insurance benefit. The amount of third party sick pay is usually calculated as a percentage of what the employee would have been paid for actually working that same pay period.

    What Is Common Law Employment?

    Common law employment is a legal term meaning any type of employment where the employer controls the work being done and how that work is done. This vague definition is one reason many court cases have been brought concerning common law employment. Over the years, court rulings in these cases have helped redefine and shape what is and what is not considered common law employment.

    How to Calculate Local Income Tax

    Nearly 5,000 different jurisdictions in 17 states have some form of local income taxes. In Ohio, a large number of cities (almost 600) and school districts (almost 200) impose a local income tax, and in Pennsylvania, nearly 3,000 municipalities and school districts combined have some form of local income tax. While this type of tax is more common in the Rust Belt states, all counties in Maryland and Indiana now have a local income tax, as well as some school districts in Michigan and Iowa.

    Do you owe local income tax?

    Depending on where you are, the tax rates vary, and some taxes change on a regular basis. In fact, some local taxes may be temporary and designed to raise funds for specific purposes, while others are permanent and help fund the city’s operating budget. Some taxes are limited and are either not reported as local income taxes or account for less than 0.01 percent of an employee’s personal income. Most local taxes range from around 1 percent up to around 3.2 percent, but most do not exceed that amount.

    What Is the EEO-1 Report for Employers?

    Federal employment law requires certain U.S. employers to submit an annual EEO-1 Report, which is a count of all employees, ordered by job category, ethnicity, race, and gender. Employers must submit the report to the U.S. Equal Employment Opportunity Commission’s (EEOC) Joint Reporting Committee.

    What Is State Reciprocity?

    Here’s a tricky question: when a person lives in one state but works in another, to which state should the employee owe state income tax?

    After all, both states may have a claim to the tax, but it certainly isn’t fair to tax the employee twice.

    What is Employer Withholding?

    A young employee’s very first paycheck can come as a shock. After all, they were hired for a specific hourly wage or monthly salary. Then their paycheck arrives, and it’s much less than expected.  That’s because of employer withholding — their employer is legally required to withhold a number of different taxes and other payments from their gross pay.

    What Are Regular Hours?

    The term “regular hours” can mean several different things, but most often refers to the usual hours that employers expect their employees to work.  When an employer runs payroll, they usually must select from several different hours types: regular hours, overtime hours, holiday hours, etc.

    What Are Payroll Liabilities?

    Payroll liabilities are any type of payment related to payroll that the company owes, but has not yet paid. Payroll liabilities can include taxes withheld from employees, such as federal and state income tax, Social Security, and Medicare, as well as other items such as union dues, health insurance contributions, 401k retirement fund contributions, and wage garnishments.

    The most common payroll liabilities are the taxes that make up an Employer’s 941 deposit. Employers are required to withhold federal, state, and local income tax from most employee paychecks, as well as Social Security and Medicare taxes which the employer matches. Most employers remit these payroll liabilities on a monthly schedule using the Electronic Federal Taxpayer System (EFTPS).

    An Overview of State Income Tax

    Employee wages are often subject to two different types of income tax withholding: federal income tax and state income tax. State income tax funds a variety of different state projects and programs, including K-12 and higher education, Medicaid and health care, corrections, public assistance, and other needs, according to the National Association of State Budget Officers. 

    Most states impose individual income taxes, except for seven states that do not. Two states have limited state income taxes.

    Individual Income Tax
    There are 41 different states with individual income taxes. These state tax amounts are withheld by their employers before they receive their net pay. Tax rates vary and may change depending on the state’s need. States with individual income tax may offer specific deductions for individuals, although there are different limits on these deductions.