Published on March 17, 2009
Taxes and Payroll By: Dylan Dow
Gross & Net Pay • Gross pay is the amount of salaries or wages being paid by an employer before any deductions have been taken out. • Net pay is the remaining amount after deductions from the gross pay.
Common Payroll Deductions • Retirement contributions, insurance premiums, child care, child support, tax levies, and other court orders. • They can be either Voluntary or involuntary.
Payroll Register • A payroll register is a report on which is summarized the wage and deduction information for employees for a specific payroll. • It is important because it determines what kind of deductions and wages the employees receive.
FICA Taxes • Step 1: Determine if you are required to pay FICA tax. Any person who is in a standard employee/employer relationship is required to pay tax on all taxable income. Anyone completing work which is considered employment under FICA law or receives funds as compensation for time spent are also required to pay FICA taxes. • Step 2: Calculate your total taxable income for the pay period. This includes all earning as part of an employee/employer relationship, such as tips, commissions, overtime, piecework earnings and any taxable benefits. Deduct any heath and dental premiums from this amount, as they are non-taxable. • Step 3: Look up the current percentage taxation rate for OASDI and the Medicare or Hospital Insurance Program. These rates are updated and maintained by the Internal Revenue Service, complete with instructions on the method used to calculate the amounts to be deducted from your pay. • Step 4: Multiply the current percentage tax rate against the taxable earnings for the period for both OASDI and Medicare or HI to calculate the amount of the deduction. The rates and limits differ between the two programs, although they are combined in the FICA tax amount. • Step 5: Compare the amounts deducted from your payroll statement against your calculation to ensure that the correct limits and percentages are used. Source: http://www.answerbag.com/articles/How-to-Calculate-FICA-Withholding/89f54665-3ea7-c592-103f-d1451d853391
Federal taxes • Step1: Determine the value of your total withholding allowances (exemptions) as claimed on your current W-4 Form by multiplying each allowance (exemption) by the semi-monthly amount of $152.08. • Step2: Subtract the amount of any salary reductions, such as PERS, TIAA/CREF, or health insurance premium from your total semi-monthly gross earnings. • Step3: Subtract STEP 1 from STEP 2 to determine your taxable gross wages. • Step4: Use the tables below to calculate the amount of federal income taxes. Be sure to use the appropriate table based upon your marital status (single or married) as marked on your current W-4 Form.
State Tax • Step1 Have your W-2 earnings statement, supplied by your employer, on hand when you sit down to calculate your state income tax. • Step2 Total up all the income you have received throughout the year from all sources--work, capital gains, investments, inheritances, prizes, grants and bursaries. • Step3 Add up the total amount of the tax deductions for which you qualify. Everyone enjoys a basic federal deduction, but you may qualify for others, depending on your situation. This is particularly true of business owners and supporters of dependents. • Step4 Subtract the total amount of your tax deductions from your annual income. The figure you will be left with is your taxable income. • Step5 Figure out the tax bracket in which you fall. • Step6 Multiply your taxable income by the decimal representation of your percentage tax rate to calculate how much you owe to the state of Arizona. • Step7 Consult the Arizona Department of Revenue to stay abreast of any changes in state taxation rates and regulations (see Resources below). Source: http://www.ehow.com/how_2076681_calculate-arizona-state-income-tax.html
Payroll tax Liabilities • A business' payroll tax liability consists of not only the taxes required to be withheld from employees' wages (Social Security tax, Medicare tax and federal income tax) but also the employer's matching share of Social Security and Medicare taxes. The business' liability is reported quarterly on Form 941 or annually on Form 944 but payroll tax deposits must be made according to deposit schedules.
How to file taxes • Step1 Determine whether you have to file a federal income tax return. If your income is low, you may not have to file. But even children have to file if they meet certain income levels or have certain types of income. • Step2 Find out what filing status you qualify for. In some circumstances you have a choice of filing statuses. Some filing statuses are better than others. • Step3 Determine how many personal and dependent exemptions you have. Personal exemptions are for yourself and your spouse. Anyone can be your dependent if he or she qualifies. • Step4 Calculate your income. Many types of money you receive can be taxable income, but some types are not. • Step5 Calculate your income adjustments. You are allowed to subtract some things from your income and lower your taxes. Source: http://www.ehow.com/how_10847_file-federal-income.html
Continued • Step6 Calculate your deductions. You can choose between a standard deduction and itemized deductions. Deductions lower the amount of your income that is subject to taxes. • Step7 Determine your income tax. Taxable income minus adjustments, minus deductions, and minus exemptions equals the income on which you are taxed. Tax tables or schedules will tell you how much your income tax is. • Step8 Determine your credits. You can get credits against your income tax for certain situations or expenses. • Step9 Determine your additional taxes. In some circumstances - for example, if you are self-employed – you may have to pay additional taxes. • Step10 Find out your total payments. This includes taxes withheld by your employer, estimated tax payments you made, and the earned income credit. The total is how much you have paid or has been paid for you. Source: http://www.ehow.com/how_10847_file-federal-income.html
Continued 2 • Step11 Find out the amount you have overpaid or underpaid. This will be your refund or the amount of tax you still have to pay. You could have a penalty for underpaying your taxes, but only if you were off by a significant amount. • Step12 Get the right tax forms and fill them out. Source: http://www.ehow.com/how_10847_file-federal-income.html
Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff.
You must deposit and report your employment taxes on time. Correcting Employment Taxes
Looking for payroll taxes information? Visit Payroll-Taxes.com today for the latest resources on state tax, federal tax, income tax and more.
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