Payroll tax is a tax imposed by the Federal government on both the employer as well as the employee. This is done in order to fund Medicare and social security which provides benefits to retirees, children of deceased workers and the disabled. Hence, in other words payroll tax is used for the benefits of old-age people and for health benefits.
The rules and regulations regarding the payroll tax and its deductions are very strict and even a small miscalculation regarding the taxes can cause serious trouble. One should, therefore be very careful in all the proceedings regarding payroll tax calculations. The first step is to get all the employees to fill up the W-4 form. The form helps in calculating the taxes on the basis of marital status of the employee and the number of dependants.
At present, the social security tax that is withheld from the wages of the employee is calculated at 6.2% of total salary of his. The same amount is contributed by the organization. There are some limitations to this; the wage basis for the tax is $76,000 an year. If the salary of the employee is beyond this then the taxes need not be deducted from the employee. However, there are many complications in calculating these taxes and hence the company need to have a payroll account so that the amount gets deducted from it each time when necessary.
There are different modes of payments for the payroll tax –the IRS provides a yellow booklet containing coupons. One can fill a coupon; take a check to the bank. Be sure to fill the top stub in the coupon. This will enable one to maintain the records. One can use the Electronic Federal Tax Payment System, which can be done online. There are many Payroll providers who offer electronic payment option.
One should be equally careful of following mistakes and try to avoid the penalties. Late payment will require one to pay 10% off the top with additional interest. One should be sure to pay using correct method and the correct amount to avoid any further problems and penalties.
