October is the month for preparing third quarter 2015 payroll reports. As you begin gathering the information you’ll send to federal, state, and local governments, check your compliance in these four key areas.
- Wages. Federal and state laws spell out your responsibilities for meeting minimum wage and overtime pay, as well as what records you need to keep, such as hours worked, pay periods, and pay dates.
Tip. Know the difference between employees and independent contractors and make sure your workers are classified correctly.
- Income tax withholding. As an employer, you’re responsible for withholding the correct amount of income tax from your employees’ wages and remitting the withholding on time as part of your payroll tax deposits.
Tip. Maintain current Forms W-4 on file for each employee to be sure you’re withholding the correct amount of tax.
- FICA taxes. “FICA” is the acronym for Federal Insurance Contributions Act and includes social security and Medicare taxes. FICA tax is a set percentage of gross wages. The base rate is 7.65% for 2015 for both employees and employers. When you pay an employee more than $200,000 in a calendar year, you’ll also withhold an additional Medicare tax of 0.9% from your employee’s wages.
Tip. There is no employer match for the additional Medicare tax.
- Unemployment tax. Federal and state unemployment taxes are not withheld from employee wages. Instead, these taxes are paid solely by you, as the employer.
Tip. Be sure you’re calculating your liability using the correct rate. A “credit reduction” applies to some states. What does that mean? When a state takes a loan from the federal government to fund unemployment compensation, and hasn’t repaid the full amount within a specified time, employers in that state pay more federal unemployment tax.
Give us a call for payroll tax tips. We’re here to help you stay up to date.
© MC 2015