As a small business owner, it is likely that you will have more involvement with different types of taxes than the average individual, and this is certainly true if you have employees working for you.
If this is the case, then you have to worry about the taxes that you have to deduct from your payroll.
Take a shot of caffeine before you read this article, but try and make it through – because understanding and properly filing payroll taxes is going to be an important part of your small business’ success.
Different Types of Payroll Tax
First, you need to understand that there are several different types of payroll taxes, and that they are incurred at different levels.
The levels of payroll taxes are those that are paid to specific governmental bodies: federal, state, and municipal.
They all have different types of taxes that need to be paid at specific percentages and at certain times, so you have to know where to look for that information.
For federal regulations, you want to go to the IRS.
You can go to their website, www.irs.gov, which includes all of the forms you never want to see, or order their package designed for business, entitled (and isn’t this a grabber) Employer’s Tax Guide.
State regulations for payroll taxes are found through the Department of Revenue of the state in which you do business.
You can also check out the Secretary of State or the Department of Labor.
Municipal payroll information can be found through your City Hall.
Unless you live in a really big city it is unlikely that you will have to worry about municipal payroll taxes, but it’s good to check and make sure.
Okay, now that we have sorted out the levels that payroll taxes occur at, it is time to take a look at the different types of taxes.
- Income taxes.
You withhold these taxes from the wages of your employees and they are paid directly to a government at some level.
States and the federal government all have a share of income taxes, and some municipalities will as well.
- Social Security and Medicare.
These taxes are paid at the federal level, which actually makes them a lot easier to figure out than income taxes.
Only federal rules apply, and you only need to contact the feds to find out information about them. Half of these taxes are paid by your employees, and half by you.
Another complicated tax, unemployment taxes are entirely paid by the business at the state and federal levels.
The amounts and specific requirements will change depending on which state you live in and what the different governments have decided on any given year, and the results can be confusing.
Are you asleep yet? Well, hopefully not, because the above was just a short sample of what payroll taxes are all about!
We didn’t even get into forms, deposits, and so on. Most businesses, large and small, will use the services of an accounting firm to handle their payroll taxes.
All that means, though, is that someone does the nitty-gritty for you. Small business owners should at least have a basic grasp of the payroll taxes they need to know about.