What Are Payroll Taxes and How Do They Work?

Introduction to Payroll Taxes

0:02 Thanks for tuning in to our channel today as we discuss payroll taxes.

0:06 Taxes can be confusing and overwhelming.

0:09 So, let's untangle the topic.

0:11 Then you can decide if outsourcing is the right choice for your business.

0:15 Payroll taxes are funds that support our government programs such as Medicare, Social Security, workers comp, and more.

0:22 Think of them as a contribution to the bigger picture.

Types of Payroll Taxes

0:25 There are two distinct types of payroll taxes.

0:27 There are payroll taxes paid by you, the employer, and there are payroll taxes paid by your employees.

0:35 Depending on where they live and work, employees may see these specific employment taxes withheld from their pay, including federal income tax, social security, and Medicare, often referred to as FICA, state and local income tax, and SUI, state unemployment insurance.

0:50 You, the business owner, may be responsible for contributing the following: FICA, FUDA, federal unemployment tax, SUI, and state disability programs. Commit these acronyms to memory. It helps, we promise.

1:03 The only thing worse than doing payroll taxes is paying them.

High-Level Steps for Managing Taxes

1:07 Here are some high-level steps to get it right.

1:09 First, determine your employee payroll tax withholdings.

1:13 Then, identify your payroll tax contributions.

1:16 Next, know your deposit schedule.

1:18 Depending on your tax liability, deposits could be due quarterly, monthly, semi-weekly, or even daily.

1:25 Now, pay them with the appropriate agencies, either through the electronic federal tax payment service or directly to your state or local agency based on the deposit schedule mandated by that agency.

1:37 And lastly, don't forget about filing the appropriate payroll tax returns.

1:41 This verifies state unemployment insurance, reconciles tax deposits remitted, and more.

1:48 Remember, the responsibility for fulfilling your business tax obligations is ultimately yours.

Tips for Business Owners

1:53 And payroll taxes are the opposite of intuitive and could not be more complicated.

1:58 But if you can nail the following tips, we think your business and employees could be better for it. Make timely deposits. There are several payroll tax deadlines to remember. However, there are plenty of resources you can use to make life easier. Properly classify employees. Be sure those working for you are classified either as employees or contractors based on IRS guidelines because misclassification can cost you. Stay current on regulations. Keep a close eye on everchanging tax rates, withholding rules, and unemployment regulations at every level to name a few.

Conclusion and Resources

2:32 We hope you're walking away with a better understanding of payroll taxes. If you're thinking maybe I should have someone else do this for me, Paychecks has your back. Don't do it alone. Details and helpful links are in the description below. We know you're busy and we appreciate you taking the time to watch. If you found this video helpful, do us a favor and hit the like and subscribe buttons. Then let us know in the comments what you'd like to see next.