We want to make payroll easy, which is why we created this free payroll tool for you to use to make a difficult task simple. Just input some information and our handy paycheck calculator will determine the federal tax for you to withhold from each employee’s paycheck. Be sure to check below to find more information on how to determine payroll taxes.
Disclaimer: This calculator by G.E. Payroll services is meant to serve as an estimation of what your federal taxes may be. This should not be used for calculating financial data. Please refer a tax professional or advisor for accurate data.
Social Security Tax
6.2% on the first $142,000. This amount must be paid once by the employer and once by the employee.
1.45% on all salary, plus an extra 0.9% on any salary in excess of $200,000. This amount must be paid once by the employer and once by the employee.
FUTA (Federal Unemployment) Tax
6% on the first $7000. This amount is only paid by the employer.
Total Employee Tax
Combined Social Security and Medicare amounts
Total Employer Tax
Combined Social Security, Medicare and FUTA amounts
Total Employee Pay
Annual Salary with pre-tax withholding, Social Security and Medicare subtracted.
What About Different Types of Workers?
How you handle payroll taxes varies greatly depending on who your workers are. According to the IRS, there are five types of employees:
- Common-law employees
- Independent contractors
- Statutory employees
- Statutory non-employees
- Government workers
The most notable here is contractors. You do not have to withhold federal taxes for contracted workers. This does raise the questions of who is considered a contracted worker.
The truth is that you have to judge each working relationship within its own context. Luckily, there are tools straight from the IRS that you can use to help make this determination. One of these is the 20-Factor Test. This list of 20 “yes or no” questions will help determine the working relationship by looking at the degree of control and independence that the worker has.
You can find that test here, though it should be noted that you can get an in-depth manual, with a total of 123 pages, by contacting your local IRS center. When going through the checklist, if you mark a high amount of “yes” answers, then the worker in question is most likely not a contractor. If you answer “no” a good amount of times, then it is very possible that the worker is operating as an independent contractor. The only way to be sure is to pursue an IRS ruling.
Keep in mind that these rules are not entirely consistent. There are some contractors that you do have to tax the same as employees. This is based on the duties that they perform. In the same way, there are common-law employees that may be treated as nontaxable independent contractors, such as direct sellers and real estate agents. Once again, contacting your local IRS office is the best way to know for sure.
This is what statutory employees and statutory non-employees are. Statutory employees are independent contractors who qualify as employees. These workers need to have their federal taxes withheld from their paycheck. On the other hand, you will see that the common-law employees who may be treated as independent contractors are called statutory non-employees. You do not need to withhold any taxes for them.
Family Payroll Tax Is Different
As long as you don’t work as a corporation, you may be able to get tax breaks by hiring family. This isn’t a hard-and-fast rule though, as different members of your family have different effects on income tax withholdings. Here are the general rules for your different family members:
- Spouse and Parents: When determining payroll taxes for your spouse and parents, you won’t have to withhold FUTA taxes (Federal Unemployment Tax), but you will have to pay for FICA taxes (Federal Insurance Contribution Tax).
- Children: Regarding children, your rules for payroll taxes change with age. You will only have to start paying FICA taxes once your child hits the age of 18 and you will be required to start paying FUTA taxes when your child turns 21.
- Siblings and Other Relatives: These family members do not qualify for any tax breaks. You will be required to handle their payroll taxes the same way you handle any other employee.
Keep in mind that these tax breaks do not take effect if you are operating your business as a corporation. The reason for this is that you will not be considered the employer, but the corporation is the employer.
How Do I Get State Tax Liability?
As an employer, you know that the federal tax is just half of the equation. State taxes are a key aspect of handling payroll that can be tough for most business owners. These laws vary greatly from state-to-state and are subject to constant change. Don’t handle this by yourself. Instead, trust an expert payroll software provider.
G.E. Payroll Services has been helping businesses maintain their businesses and stay compliant for years, all the way since our start in 1993. We deliver payroll services with the latest in cloud-based software. Within that software you will find a calculator to help determine all of the tax withholdings you need for each of your employees. You will also find a ton of other useful features geared towards streamlining your business for payroll, human resources, and time & attendance.
If you’re interested, you can request a free demo today! All you have to do is fill out this quick form. If you have any questions or want to learn more, call us at (434) 426-0134 or fill out our support form.