Payroll Tips & Advice » Taxes

2008 Tax Summary Rates and Limits

payrollpro — Tue, 19 Feb 2008 06:49:11 +0000

Hi all,

The busiest months of payroll are gone, I can dedicate some time back to this blog, I’ll try to update it regularly.

I’ve created a summary page for you and I hope you find this useful. 2008 TAX SUMMARY RATES AND LIMITS

	TAX RATE	EMPLOYEE PAYS	EMPLOYER PAYS	WAGE LIMIT
FEDERAL UNEMPLOYMENT (FUTA)	0.8%	NO	YES	$7000
SOCIAL SECURITY (FICA)	6.2%	YES	YES	$102,000
MEDICARE	1.45%	YES	YES	NO MAX
PERSONAL INCOME TAX	VARIES	YES	NO	NO MAX
STATE UNEMPLOYMENT (SUI)***	VARIES	NO/YES	YES	VARIES

Notes***State Unemployment Insurance (SUI)- In a few states, the employees are required to pay the SUI tax. Please check your state for more details. If you need more information about a specific state, you may want to check with your state .

10 Things you need to know before switching payroll services

payrollpro — Thu, 09 Aug 2007 05:11:46 +0000

So you are frustrated with your current service provider and are ready to make a move to go to another company, here are some tips you may want to consider before switching:

Payroll Records—Make sure you have all the payroll records before switching because your new company will require that information assuming you are transferring in the middle of the year.
Tax Payments and Filings—Please make sure your current service provider will pay all your outstanding taxes and file any forms because the new service provider will not assume liability of what your prior service provider did.
Cancellation of Service—Please make sure you do not cancel your current service until the new service provider has completely set up your profile and wages because I’ve seen companies canceling services and unable to run a payroll because the new service provider does not have all the necessary information.
New Quarter or New Year—The best advice for business owners planning to switch payroll service is to start in a new quarter or wait until the following year. The reason behind this is having a clean start with the new service provider; it will be easy to enter the Year-to-Date wages for W-2 purposes. If you are starting in a new year, then there are no wages to carry over; it would be a simple setup process.
Customer Service—Please test out the customer service making sure there are live people answering the phones before switching services. What good does it do if the price is really cheap and you can’t get basic customer service?
System Functionality—Please verify that the system is able to support all your payroll needs such as 401K, 125 Plans, Internet access, garnishments, etc. There are so many payroll companies out there, but not everybody can accommodate you like ADP or Paychex. Some systems only supports up to 50 or 100 employees, you need to make sure they are capable of handling your situation.
Local vs National—When thinking about switching service providers, please make sure you know where they’re located at because if they’re local then you can print checks and get it deliver faster compare to a company in a different state.
Reports—Certain companies will offer certain reports such as Certified Payroll Reports, ask them about the reports that you need and make sure they can handle it.
Tax Debits—If you are tight on cash flow, choose a company that will debit your account two days before the due date; instead of paying the taxes on every payroll. As you know payroll service providers make money from interest on your money and don’t pay it until the due date.
Year End Forms—Please make sure one company is handling your year-end forms such as w-2s, 940, etc. Sometimes you would cancel service from the previous service provider and they filed a W-2 at year-end for you because you didn’t inform them to stop all the filing obligations. The new company files a W-2 also and you’ll have two sets at year-end.

I hope you find this information useful as switching payroll service can be complicated, but as long as you understand the concept of it, you can make the transition smoother.

2007 TAX SUMMARY RATES AND LIMITS

payrollpro — Sun, 25 Feb 2007 19:55:23 +0000

I’ve created a summary page for you and I hope you find this useful.

2007 TAX SUMMARY RATES AND LIMITS

	TAX RATE	EMPLOYEE PAYS	EMPLOYER PAYS	WAGE LIMIT
FEDERAL UNEMPLOYMENT (FUTA)	0.8%	NO	YES	$7000
SOCIAL SECURITY (FICA)	6.2%	YES	YES	$97,500
MEDICARE	1.45%	YES	YES	NO MAX
PERSONAL INCOME TAX	VARIES	YES	NO	NO MAX
STATE UNEMPLOYMENT (SUI)***	VARIES	NO/YES	YES	VARIES

Notes

***State Unemployment Insurance (SUI)- In a few states, the employees are required to pay the SUI tax. Please check your state for more details.

If you need more information about a specific state, you may want to check the Automatic Data Processing (ADP) Resources page. You will find a lot of useful information for employers, but you may still want to confirm the rates and wage limits every year since this is not an official government website.

Paying Taxes (Part I)

payrollpro — Wed, 21 Feb 2007 16:01:33 +0000

Let’s continue the second segment of the payroll process, which involves paying taxes. I guess the question on your mind is why do employers go through the process of paying employees and paying taxes for them? The answer is simple, it’s because you are doing the right thing for both the employee and yourself (the employer). I seen many employers that bypass this entire step and simply pay the employee cash without deducting any taxes. This may be a simple way to pay your employees, but if I’m the employee I would not work for an employer that’s only paying me cash. Here are my reasoning:

1. If the employer doesn’t deduct any of the taxes, the employee will be responsilble to pay for all his or her own taxes in April which means that taxes will be owed and you may have to cough up a larger amount during that time. I prefer to pay my taxes throughout the year, so that way I know it will reduce my tax liability during April.

2. If the employee is unemployed for whatever reason, the employee can not collect unemployment benefits because the employer has not paid any of the Federal Unemployment Tax (FUTA) or State Unemployment Tax (SUI). These are actually employer taxes, so it doesn’t get deducted from the employees checks in most states. It’s one of the best benefits for working for a company that gives you a paycheck with the tax deductions.

3. If the employee retires and assuming the Social Security Funds will still be available, he or she can not claim any of it because the Employer hasn’t been paying any of those funds while the employee was employed. Remember Social Security and Medicare are paid by the employees and the employers.

The next time you want to pay the employee cash only without deducting taxes, you may want to reconsider because the employee really ends up losing in the long run. All these taxes deducted are really to benefit them and it’s also a way of thanking your employees for their service while they’ve been employed with you.

Let’s get back on track here and let me explain to you what are payroll taxes? The following taxes will be covered here:

Federal Withholding
Social Security (FICA, OASDI)
Medicare
State Withholding
Other State Taxes
Federal Unemployment
State Unemployment

Federal Withholding – This amount shown on the paystub reflects what the individual employee claims on the W-4 form which includes the marital status, number of allowances, income, and pay frequency. There are no fix rates here, so all the employees that have different allowances will have a different amount deducted on their paychecks.

Social Security – It’s also known as FICA or OASDI, this tax is taken out at a 6.2% rate, the employee pays this portion and the employer matches that rate.

Medicare – It’s also a fixed rate required by the federal government, which is tax at a 1.45% rate. The employee and employer pays that amount.

State Withholding – Similar to the Federal taxes. It varies based on the marital status and number of exemptions from each employee and projected annual income. Only nine states do not have a state withholding tax, which includes AK, FL, NH, NV, TN, TX, SD, WA, and WY.

Federal Unemployment Tax Act (FUTA) – This benefit provides payments of unemployment of compensation to workers who lost their jobs. The FUTA tax rate is usually 0.8% and is based on the first $7000 in wages per employee; therefore, the maximum tax liability for each empployee would be $56.00.

State Unemployment Insurance (SUI) – This is similar to the FUTA, but the state controls this portion of it. The state funds unemployment through this tax and is usually paid by the employer; however, some states such as Pennsylvania and New Jersey also require the employees contribute to this tax.

There may also be other state taxes or local taxes within your county, city, or jurisdication, so please check with local government to determine if there are any other taxes that needs to be paid.

I’ll cover the second segment on paying taxes next time. Thank you for reading.