Payroll Taxes and Your Business
While employees pay the majority of payroll taxes, employers share some of these payments. If an employer does not remit these payments on time or fails to make the payments at all, the company will be subject to monetary fines. For a delay of up to five days, the fines start at 2% of the past amount due. For ten days of non-payment, the penalties increase by up to 15%. After that, the employer can expect a payment notice from the IRS.
Here is a detailed list of the payroll taxes and who pays them:
Federal Income Tax
Employees must submit a Form W-4 to notify their employers of the amount of withholding they choose to have withheld. The employers must withhold the amount chosen by their employees that is reflected on the W-4 Form. These forms must be kept in separate files for each employee at the employer’s office.
Social Security Tax
For the Social Security tax, each year the federal government sets a limit on the number of earnings subject to social security tax. For 2022, the maximum amount of Social Security Tax that can be withheld is $9,114. The Social Security tax rate is 6.2% for employees and 6.2% for employers. It is deducted up to the annual wage limit set by the IRS which is $147,000 as of 2022.
Medicare Tax
The Medicare tax amount is 2.9% of an employee’s salary. Both employee and employer share in the payment, thus the employer pays 1.45% and the employee pays 1.45%. Employees earning more than $200,000 receive an additional .9% and a flat rate of 2.9% for self-employed persons.
Federal Unemployment Tax
Deductions for the Federal Unemployment tax amount to 6% of an employee’s first $7,000 in earnings. This tax is solely the responsibility of the employer.
NY State Income Tax
NY State Income Tax ranges from 4-10.9% according to an employee’s wage/income. Additional bonuses or commissions are withheld at a higher rate of 11.7%. Just like the W-4 Form, employers must withhold the amount chosen by their employees on the NY IT-2104 form they completed and keep the form in the employee’s file.
NYS Disability Insurance Tax
NYS Disability Insurance tax is a $.60 per week deduction from an employee’s paycheck the employer shares with the employee and submits on their behalf.
NYS Unemployment Tax
NYS Unemployment tax rates range from 2.025% to 9.825% and payments are the responsibility of the employer.
NYS Paid Family Leave
NYS Paid Family Leave (PFL) is fully funded by employees through payroll deductions of .511% of an employee’s gross wages each pay period. (Maximum annual contribution is $423.71 for 2022)
Tax laws can often change. If you have questions or concerns regarding your responsibilities as an employer or need help with payroll services, please contact our office at 716-720-5339.