Payroll Responsibilities Every Employer Needs to Know

Stephanie Glanville | June 26, 2018 | Read time: 5 minute(s) | Small Business, Tax Tips, W-2 Forms | No Comments

Congratulations! You have hired your first employee, and now it is time to make sure they get paid. If you are new to payroll, you have probably found yourself in uncharted waters. While navigating the seas of IRS terminology might seem intimidating, we are here to help you through it. Our sister product, PayWow is explaining the payroll responsibilities every employer needs to know.

Payroll Responsibilities Every Employer Needs to Know

Let’s face it, out of everything you do as an employer, payroll calculations and taxes are one of the least enjoyable. However, taxes are a fact of life for every small business owner, so it is best to know as much as you can before getting started.

What are Payroll Taxes?

Employment taxes, commonly referred to as payroll taxes, are those taxes you as an employer must consider when paying your employee(s). Some of these taxes are withheld from your employees pay while others are your responsibility.

Employee Paychecks:

Federal, state, local withholdings for income taxes
FICA tax withholding

Employer Responsibility:

FCA tax withholding equal to employee amount
Unemployment taxes based on employee pay
State and federal worker’s compensation funds (based on employee pay)

Additional Payroll Deductions:

Voluntary payroll deductions are agreed to by the individual employee. Your employees participate voluntarily in these deductions and choose to have this amount withheld from their paychecks to pay or contribute to a variety of benefits. Here are some examples of voluntary payroll deductions:

Health Care Insurance
Line Insurance
Retirement Plans
Employee Stock
Job-Related Expenses (Unions dues, uniforms, etc.)

Employer Payroll Responsibilities

Your responsibility for payroll taxes continue even after your employee’s paychecks have been issued. Your small business is responsible for the following:

Employer’s share of payroll taxes
Calculating payroll expenses through financial reporting
Preparing reconciliation forms and reports
Sending payroll taxes and returns to the IRS

Employer Payroll Taxes

As a small business owner with employee(s), you are responsible for paying the employer’s portion of payroll taxes. This amount is an added expense on top of the employer’s payroll tax. You must pay your share of payroll taxes including:

Medicare Tax
Social Security Tax (6.2%)
State Unemployment Tax (SUTA)
Federal Unemployment Tax (FUTA)

Share Payroll Taxes (Employer & Employee)

The FICA tax is comprised of the Medicare & Social Security tax and this amount is paid by both you and the employee. Each party must pay half of the tax which in total is 15.3 percent.

Employer Tax:

Social Security (6.2%)
Medicare (1.45%)

Employee Tax:

Social Security (6.2%)
Medicare (1.45%)

Simplify Your Payroll and Compliance

As a small business owner, you don’t want to pay a tremendous amount of money for a payroll software solution with irrelevant tools you will never use. If you have been processing and filing your own payroll, we applaud and salute you for your valiant efforts. We know that it is not an easy task. However, might we suggest a better solution?

Outsource some of those problematic payroll tasks at an affordable price with software specifically designed for small businesses. At PayWow, we are dedicated to saving your small business time and money.