Payroll Tax services are an essential component of any business, whether you have one employee or thousands. It is the foundation of a successful business, ensuring that employees are paid correctly, on time, and receive other benefits.
How much is the payroll tax in Chattanooga, TN?
When you first started your business, you may have had to decide whether your employees would be W2 or 1099. It’s not a minor issue, but it will have a long-term impact on how you do business and whether the IRS comes to visit you about it. It can also help protect you from payroll fraud.
Rates of Federal Payroll Tax
Here’s how it works, along with the tax rates you’ll need to apply for calculating each employee’s paycheck.
- Figure out each employee’s gross wages. Gross wages are the total amount of money earned by your employee during the current pay period. The math for salaried employees, hourly employees, and contractors differ slightly.
- Hourly employees: You must multiply the number of hours worked by the hourly rate of your employee. Make sure to calculate any overtime hours they worked at the overtime rate.
- Salaried employees: A salaried employee is only paid a portion of their annual salary per paycheck, so divide that employee’s yearly salary by the number of pay periods you’ll have each year.
- Contractors: Advance to “Go” and receive $200! Contractors are not required to withhold any payroll taxes. Just pay them what’s on their invoice, but keep in mind that you’ll need to send each contractor a 1099 form at the end of the year. Keeping accurate payroll records will make the process much easier.
- Deduct any pre-tax withholdings. Payroll taxes aren’t the only thing that should be left out of employees’ paychecks. Make sure to account for health and retirement benefits. Depending on your benefits provider, the process for documenting and remitting these funds will differ. It is important to note that many services can be integrated with payroll software, allowing you to automate your deductions.
- Deduct and match any FICA taxes: FICA, or the Federal Insurance Contributions Act, is one of the many payroll abbreviations you’ll quickly learn and love. It simply means the Medicare and Social Security taxes that both employees and employers must pay:
- Social Security tax: Withhold 6.2% of each employee’s taxable wages until they reach $147,000 in gross pay in a given calendar year. The maximum salary an employee will receive in 2022 is $9,114.00. You must also match your employees’ contributions as an employer.
- Medicare tax: You must also withhold 1.45% of each employee’s taxable wages for Medicare under FICA. Employers must also match this tax. There is no withholding limit like Social Security, but employees earning more than $200,000 must pay an Additional Medicare Tax of 0.9%. You are not required to match the 0.9%, but you should account for it in your withholding calculations.
- Pay FUTA unemployment taxes: Employers are solely liable for federal unemployment taxes. The tax rate is 6% on the first $7,000 of taxable income earned by an employee per year. You may be eligible for a tax credit if your company is required to contribute to a state unemployment fund.
- Deduct federal income taxes, which is the most significant tax that your employees will pay. The tax rate can range anywhere from 0% to 37%.
- Subtract any post-tax deductions: Some employees may be subject to court-ordered wage garnishments or child support payments. They may also make after-tax contributions to savings accounts, elective benefits (such as life insurance), or other withholdings.
Tennessee State Payroll Taxes
Tennessee’s income tax is straightforward, with a flat rate of 0%. Tennessee unemployment insurance rates range from 0.01% to 10% for the calendar year 2022, with a taxable wage base of up to $7,000 per employee per year. A flat rate of 2.7% is charged to new employers.
Want to know more about the information above?
You’ve come to the right place because Workergenix’s virtual professionals will assist you in obtaining what you require for your business. You no longer have to be concerned about minor tasks. The objective of Workergenix is to free your time, unlock your potential, and help you focus on doing other profitable things.
Simply fill out the following form to schedule your free, no-obligation, consultation today, click here.
