While Rizzolo Group offers complete payroll accounting services, we realize that there will always be employers who prefer to calculate their own payrolls. The following tips will be helpful in doing so:
1. All employees should complete Form W4. You can download copies and instructions from www.irs.gov. The basic information needed is the employees filing status and number of withholding allowances. You'll use these two variables, along with pay frequency, to look up income tax rates on the IRS withholding tables and make the appropriate payroll deductions. Employees may also indicate that they wish for additional taxes to be withheld beyond the calculated withholding. If you're missing a W4, assume that the filing status is single with no withholding allowances. Your state should also have a comparable form applicable to state income tax withholding. Access your state's department of revenue website in order to find on-line versions and instructions for state payroll deductions.
2. Get yourself a copy of IRS Publication 15: Circular E, Employer's Tax Guide. You can print a .PDF version from the IRS website or call 1-800-829-3676 and request that a free copy to be mailed to you. This publication includes the IRS' cryptic instructions and most importantly, those income tax withholding tables. Don't forget to get a new copy each year as the tax rates change. Again, your state will have a comparable publication and tax tables, unless your business resides in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming or Washington. These states don't tax personal wages.
3. Use the federal and state withholding tables included in the tax publications to calculate income tax withholdings. You may also use the payroll caluclator link below. Example, you have a married employee, Gina, claiming 3 withholding allowances (2 kids plus herself) earning $7.35 per hour. Gina works a minimum of 40 hours and is paid weekly. You pay time and a half for overtime. One week Gina works 49 hours. Her base pay is $294 (40 x $7.35) plus overtime of $99.23 (9 x ($7.35 x 1.5)) for total gross pay of $393.23. Use the Married persons table for Weekly payroll, find the applicable pay range in the columns to the far left and then find withholdings for the correct number of withholding allowances.
4. Social Security withholdings are fairly straightforward. Withhold 6.2% from every check until employee wages reach $106,800. Cumulative social security withholding for the year should never exceed $6,622 (that's 6.2% of $106.8K). Don't forget that as an employer, you're required to match employee withholdings. You would withhold $24.38 ($393.23 x .062) from Gina's pay.
5. Medicare withholdings are the simplest of all ... withhold 1.45% from every check. Again, you have to match Medicare withholdings. You would withhold $5.70 ($393.23 x .0145) from Gina's pay.
Please use the following link to access our online payroll calculator. You may also access our income tax calculator by clicking the convenient link on that page.
If calculating your own payroll isnt for you, call our office or click REQUEST INFO for more on Rizzolo Groups complete payroll accounting services today!