I would like to know how you calculate the W2 Form of Tax for your employee?

Question

I know there are three different kinds of tax you have to pay to the government. Umeployment and others i don't know. I am going to run a business so i would like to know so i could do pay check. Please help me out, i would greatly appreciated. Thanks!

Answer 1

These are the taxes you withhold from each employee:

1. Federal Income tax - based on the W-4 that the employee gives you and the tables in IRS Publication 15

2. Employee's half of Soc Sec - 6.2%

3. Employee's half of Medicare tax - 1.45%

4. State income tax - dependent on your state's laws

5. Local income tax - if your city or county or school district has one

You get to bundle them up and send them to each level of govt once a quarter (until your business is bigger and you send them more often).

You get to send them with all of your other taxes that come out of your pocket:

1. Your income tax based on the business's profit and your other income.  (You get to pay that quarterly now just like all these other taxes.)

2. Employer's half of each employee's Soc Sec - 6.2%

3. Employer's half of each employee's Medicare - 1.45%

4. FUTA (Fed Unemployment) tax on each employee.

5. Your state may have a SUTA (state unemployment) for each employee.

Don't forget to send the govt their share of the money every quarter for each of these taxes.  You don't get to wait until tax filing time.  "Pay as you go!"

Answer 2

You'd be wise to talk to a CPA about the requirements.  Penalties can be severe if you don't do it right.  What you have to withhold, and what employer taxes you have to pay, can vary by where you are located.

At a minimum, for an employee you withhold social security and medicare, and federal income tax depending on their W-4.  For info on federal, download publication 15 at irs.gov

For state there are most likely a variety of requirements - those would depend on your state.

Answer 3

You should, initially at least, hire a commercial bookkeeper to do your payroll.