Category: Payroll

How to Calculate Payroll Taxes in 2023

If you run a CPA firm or manage payroll for a business, calculating payroll taxes is a crucial part of your job. Calculating payroll taxes accurately is critical for any CPA firm or business managing payroll. Not only is it essential for compliance with tax laws and regulations, but also for avoiding costly penalties and interest.

In this article, we’ll provide a comprehensive guide on how to calculate payroll taxes, covering the types of payroll taxes, payroll tax forms, and two methods for calculating payroll taxes: manual calculations and payroll software.

Additionally, we’ll discuss the benefits of outsourcing payroll to a professional accounting firm. By the end of this article, you’ll have the knowledge and resources you need to confidently and accurately calculate payroll taxes.

Types of Payroll Taxes

When it comes to payroll taxes, there’s no room for error. As a CPA firm, you need to know the types of payroll taxes employers are responsible for calculating, from federal income tax withholding to state and local income tax withholding.

In this section, we’ll break down each type of payroll tax, explain how they’re calculated, and highlight the wage base and tax rates you need to know.

Get ready to become a payroll tax pro!

Employers must calculate several types of payroll taxes for each pay period. These include –

1. Federal income tax withholding

Employers must withhold a portion of each employee’s paycheck for federal income taxes. The amount withheld is based on the employee’s gross pay, tax filing status, and the number of allowances claimed on their Form W-4.

2. Social Security tax

Both employers and employees are required to pay Social Security taxes, which fund retirement and disability benefits. Employers are responsible for withholding the employee’s share of Social Security tax from their paycheck and paying the employer’s share.

3. Medicare tax

Like the Social Security tax, employers and employees must pay Medicare taxes. Employers are responsible for withholding the employee’s share of Medicare tax and paying the employer’s share.

4. State and local income tax withholding

In addition to federal income tax withholding, employers may also be required to withhold state and local income taxes from employee paychecks. The amount withheld is based on the employee’s gross pay and tax filing status and varies by state and locality.

When calculating these payroll taxes, it’s essential to understand the wage base and tax rates for each tax. The wage base is the maximum amount of an employee’s pay subject to a particular tax. The tax rates vary by tax and can change from year to year. It’s essential to stay up-to-date on the latest tax rates and wage bases to ensure accurate payroll tax calculations.

Payroll Tax Forms

When it comes to payroll taxes, filing the right forms at the right time is essential for compliance with tax laws and regulations.

As a CPA firm, it’s your responsibility to know which forms to file and when from the employee Form W-4 to quarterly Form 941 and state and local tax forms.

In this section, we’ll break down each form, explain its purpose, and provide tips on how to stay organized and avoid any penalties or interest charges. It’s essential to stay up-to-date with federal and state tax rates for federal income tax withholding, Social Security tax, Medicare tax, and state and local income tax withholding.

Ready to become a payroll tax form-filing pro and ensure accurate payroll tax calculations for your clients?

Keep reading…

1. Employee Form W-4

The employee completes this form and determines the total amount of federal income tax to withhold from their pay.

The purpose of Employee Form W-4 is to ensure that the correct amount of tax is withheld based on the employee’s filing status, number of dependents, and other factors that affect their tax liability.

A tip for staying organized with Form W-4 is to keep a copy of the form for each employee in their personnel file.

2. Form 941

This is the quarterly tax form used to report total federal income tax withheld, Social Security tax, and Medicare tax for each quarter of the year.

The purpose of Form 941 is to reconcile the total tax liability for the quarter and ensure that the correct amount of taxes were withheld from employee paychecks.

A tip for staying organized with Form 941 is to schedule a reminder to file the form before the due date, typically the last day of the month following the end of the quarter.

3. State and local tax forms

Each state and locality may have its own tax forms that must be filed to report payroll taxes.

The purpose of these forms is to report the amount of state and local income tax withheld from employee paychecks, as well as any other required payroll taxes.

A tip for staying organized with state and local tax forms is to check with the appropriate state and local tax authorities to determine the filing requirements and due dates and keep track of these deadlines in a calendar or scheduling tool.

All in all, it’s essential to understand the purpose of each form and when they need to be filed. Failing to file payroll tax forms on time or with accurate information can result in penalties and interest charges.

Fortunately, resources are available to help ensure compliance, including the IRS website and software solutions like QuickBooks and ADP.

Stay organised and stay on top of your payroll tax forms to avoid any headaches down the line.

How to Calculate Payroll Taxes

As a CPA firm, accurate payroll tax calculations are essential to ensure your clients comply with tax laws and avoid penalties.

Two main methods of calculating payroll taxes are manually or using the software.

Let’s explore each method in detail:

1. Manual calculation

To manually calculate payroll taxes, you’ll need to know the current tax rates for federal income tax withholding, Social Security tax, Medicare tax, and state and local income tax withholding. You’ll also need to calculate each employee’s taxable income, considering any deductions or exemptions.

Read also: Decoding the Payroll Deductions Mystery: The Ultimate Guide

The following table provides an example of how to manually calculate payroll taxes for a single employee in California earning $50,000 per year. It’s essential to accurately calculate payroll taxes to avoid penalties and ensure compliance with tax laws and regulations.

You can use a tax calculator or payroll software to simplify the process or consider outsourcing payroll to a professional accounting firm for expert assistance.

Additionally, understanding the wage base and paying federal and state unemployment insurance taxes can further ensure compliance and reduce risks for your business.

This method can be time-consuming and prone to errors.

Hence, it’s important to double-check your calculations and stay up-to-date on any tax law changes.

Here’s a table for the manual calculation of federal income tax withholding based on the 2023 tax year:

2. Software calculation

Payroll software like QuickBooks or ADP can simplify payroll tax calculation by automatically calculating payroll taxes based on the employee’s annual salary, taxable income, and tax withholding information. These programs also consider additional information such as paid time off or benefits, ensuring accurate and up-to-date payroll tax calculations for federal and state taxes and Medicare and Social Security taxes.

Choosing a reliable and accurate payroll software program is vital to ensuring accurate payroll tax calculations while saving time and reducing the risk of errors. It’s also essential to stay informed about tax rates, tax forms, and tax regulations, including the federal and state wage base and the Federal Insurance Contributions Act (FICA) tax rate.

Whichever method you choose, accurate payroll tax calculation is crucial for avoiding penalties and maintaining compliance with tax laws and regulations. Staying organized with tools like a tax calculator, IRS Publication 15-T, and payroll tax forms such as Form W-4 and quarterly Form 941, as well as filing and paying federal and state unemployment taxes and tracking tax returns, can help ensure successful payroll tax management for your clients.

3. Outsourcing Payroll

Benefits for CPA Firms

Partnering with a professional accounting firm for payroll services can benefit CPA firms in multiple ways:

Enhanced Client Service

By outsourcing payroll, CPA firms can provide their clients with accurate and timely payroll processing, tax filing, and compliance services, enhancing overall client satisfaction.

Time and Resource Savings

Outsourcing payroll frees up valuable time and resources for CPA firms, allowing them to focus on core financial management tasks like tax planning and financial forecasting.

Expertise and Compliance

Working with a payroll expert ensures compliance with federal and state tax laws and regulations, keeping clients up to date with ever-changing payroll requirements.

Benefits for Businesses

Outsourcing payroll to a professional accounting firm like Unison Globus brings significant advantages for businesses:

Efficiency and Accuracy

By entrusting payroll calculations to experts, businesses can ensure accurate and error-free payroll processing, eliminating the need for time-consuming manual calculations.

Compliance and Risk Mitigation

Professional accounting firms stay up to date with tax laws and regulations, ensuring businesses remain compliant with federal and state payroll tax requirements. This reduces the risk of penalties and legal issues.

Cost Savings

Outsourcing payroll eliminates the need for in-house payroll staff and associated overhead costs, resulting in potential cost savings for businesses.

Conclusion

Calculating payroll taxes accurately is crucial to avoid penalties and ensure compliance with tax laws. The blog post has covered the types of payroll taxes, payroll tax forms, and resources available to help with payroll tax calculations. If you’re feeling overwhelmed, outsourcing payroll to a professional accounting firm like Unison Globus can relieve the burden and provide access to payroll experts. Don’t let payroll tax calculations become a headache – use the information and resources provided to navigate the process confidently.

hey oIs a top-tier payroll outsourcing service something you need?

Hiring a payroll outsourcing company can help you save money and time, allowing you to put those resources toward expanding your business.

After all, most companies pay their employees every two weeks.

Automatically processing payroll can be one of the best decisions you make for your company this year, whether you do it yourself in your spare time or want to reduce the amount of work your assistant has to do.

Read on to learn how to choose the best payroll outsourcing service, whether you’re a small business owner searching for H.R. support or the head of a larger organization.

Best Payroll Outsourcing Service

There are various payroll outsourcing services available, and they can be helpful whether you run a small business with a handful of employees or a multinational corporation with thousands. These businesses provide a wide range of services, from employee-focused mobile apps to on-demand databases.

There is a wide variety of payroll software out there; before committing to a different company, you may want to check out the services provided by the ones listed here.

Deluxe Payroll

Deluxe Payroll has assisted businesses with their payroll processing needs for many years. Anyone from sole proprietors to multinational conglomerates can count on receiving service.

A few of the features included in Deluxe’s standard payroll package are:

• Tax filing advice
• Employee checks
• Payroll register
• Business services
• Exception reports and more

Bank reconciliation, payroll debit cards, paper checks, and direct deposits are available. Furthermore, they have support staff standing by to assist you with anything related to payroll processing.

In addition to using the Deluxe payroll website, you can submit your payroll information by phone, fax, or email.

Unison Globus

There is a good chance that Unison Globus is the largest and one of the best payroll outsourcing service firms in the US. Unison Globus has an excellent reputation and highly rated customer service.

They offer following Payroll Services:

• Payroll Processing
• Record Maintenance
• Executive Payroll Services
• Payroll Tax Reporting
• Payroll Reconciliation & more.

Unison Globus’s payroll plan will do when you only need to submit direct deposit payments to 1099 contractors or W-2 employees. Use their enhanced payroll service to get additional state benefits. This middle-tier plan is also required if you want to accept paper checks or prepaid cards as payment.

APS Payroll

A variety of advantages are available to those who use APS Payroll.

Features of the offered payroll services are as follows:

• Paid-on-time taxes
• Tax documents are readily available
• APS promises to cut payroll time from days to hours

APS Payroll provides more than just payroll processing services.

• Attendance tracking
• H.R. support
• Recruiting help
• Streamlined onboarding

Just like with Paylocity, there is a lack of specifics regarding pricing. Instead, you’ll need to get in touch with the company to get an estimate that considers your business’s specifics.

Gusto

Gusto is web-based payroll software that simplifies and reduces the cost of managing payroll. One of their standalone plans starts at $45/month, or you can connect their app to FreshBooks for free. Connecting Gusto to your accounting software of choice is also an option.

Each of Gusto’s three payroll plans includes a variety of H.R. features, from the bare minimum to a comprehensive suite of

• Concierge
• Core
• Complete

Gusto’s pricing plans are reasonable and may be cheaper in the long run than competing online payroll options.

Gusto’s Core plan, which covers benefits administration, is significantly more feature-rich than its competitors’ mid-tier offerings compared to competing for outsourcing firms.

This is why the Core plan should suit your needs just fine:

• E-sign I-9s and W-4s for new hires.
• Automatically pay unemployment insurance
• Tracking PTO
• Benefits management Business
• Workers’ Comp administration

Included in the Full and Concierge plans are the following benefits:

• Online offer letters
• Employee-specific documents
• Employee directory
• Payroll requests and approvals
• Certified H.R. Pros

In addition, Gusto provides human resource and benefits administration services for those who subscribe to their Concierge plan.

As well as a devoted Gusto support team, these tools allow you to administer and track employee training swiftly.

iSolved

iSolved can help you with everything from simple to complex payroll processing. You can also keep attendance and time and attendance records.

In addition, iSolved provides access to portals for:

• Administrators
• Employee self-service
• Insurance brokers or agents
• Managers

Using role-based access controls, it’s simple to give each division the data it needs to process payroll in a way that meets workers’ expectations.

Also, you aren’t overloading any division with too much responsibility or information.

You could use iSolved if you need comprehensive human resources and payroll solution.

Paychex

As one of the largest payroll software providers, Paychex handles payroll for 8% of private sector workers in the United States.

Depending on the size of your business, select the appropriate platform.

• 1-9 employees
• 10-49 employees
• 50-1,000+ employees

Express Payroll and Paychex Flex Select are the two most common choices for companies with nine or fewer employees.

The advantages of using Express Payroll are as follows:

• EFTs
• Recruiting
• Payroll taxes
• 24/7 support self-service app free

Paychex will also automatically handle all of your employees’ state, federal, and local tax filings and payments.

Paychex will also report new hires to the relevant state registry without your involvement, saving you time and effort.

When you upgrade to the Flex Select plan, you gain access to a dedicated payroll expert and other perks like the ability to print physical checks and labor compliance posters.

Moreover, Paychex makes it simple for workers to view their payment history.

They also have access to the Paychex financial wellness program, which offers a variety of resources designed to help employees better manage their personal finances.

PayCor

Paycor can be used for a wide variety of purposes, including:

• H.R. Support
• Payroll
• Time
• Tax Services

The payroll process is organized and quick. You can easily keep tabs on your company’s progress toward its goals with the built-in progress bars, and you can streamline your accounting with the General Ledger files.

To avoid overpaying an employee or incurring penalties and fines, Paycor sends you alerts whenever it detects a potential red flag.

Paying employees through direct deposit is the norm, but you can also provide them with paper checks or prepaid cards as an option.

Paycor is compatible with all 401(k) providers and can manage your benefits.

The Paycor payroll tax software is used to calculate tax withholdings and deductions for employees automatically and can also be used to pay your own payroll taxes.

You can reduce your company’s tax bill by using the payroll tax service, which includes assistance in claiming tax credits.

Intuit Quickbooks

If you use Intuit Quickbooks to keep track of business expenses, upgrading to their Enhanced Payroll or Full-Service Payroll service may seem like a natural next step.

Any of their payroll packages for small businesses include this feature:

• Essentials
• Simple Start
• Enhanced Payroll

Input payroll data for as many as 50 employees and independent contractors using Quickbooks Enhanced Payroll.

QuickBooks will automatically figure out your W-2 forms and provide free 24/7 direct deposit.

Payroll taxes are also calculated and paid for you by Quickbooks. In addition, you can get in touch with a real-life payroll guru whenever you want.

Full-Service Payroll

Alternatively, the Full-Service Payroll upgrade provides access to a comprehensive H.R. Suite and the standard payroll services.

The advantages include, among others:

• Same-day DD
• Guaranteed refund
• Experts handle payroll, tax filing, and payment.
• Employment applications

In our opinion, the fact that there is no penalty for canceling this payroll service is one of its coolest features. Quickbooks will cover any penalties or fees related to taxes that you incur due to an error on their part.

OnPay

OnPay is one more reasonably priced but feature-rich payroll software application to consider.

Pay $36 per month plus $4 per worker to receive:

• Self-onboarding
• Free checks, prepaid cards
• New-hire reports
• Free digital W-2 printing for employees
• Ex-employees have lifetime access

You can save money by using OnPay because it eliminates the need for paper checks and plastic payment cards.

For most payroll outsourcing providers, these two physical payment methods come at an additional cost or are only included in their more expensive packages.

Although direct deposits are the most time and effort-saving, it’s nice to have this choice when a check is more convenient.

OnPay can also be used for 401(k) deductions and benefits. When it comes time to pay either of these employee perks, it may be cheaper to use this service than to hire a payroll processing outsourcing company separately.

Rippling

Rippling is an affordable payroll system built to streamline your business.

Each user pays as little as $8 per month. This cost-effective option allows small businesses to reduce expenses. However, a large organization’s price per user can quickly add up.

Automate all of your following paper tasks with Rippling:

• Onboard/offboard
• 50 states’ payroll
• State, federal, and local taxes
• New-hire tax documents
• Deposits or checks
• Employer garnishments

You’ll have an easier time coordinating employee perks, keeping track of the calendar, and enforcing uniform policies across the company.

Additionally, use the system all through the procedure of applying for employment. Recruiting reports, email drafts, and screening questions can all be tailored to your specific needs. It’s simple to manage educational compliance for current employees, whether by uploading a custom course or choosing from a library of pre-built courses.

Rippling can be used for more than just managing employees. For example, you can use it to manage the apps on employee devices, keep track of stock, and more. It’s an all-encompassing system designed to facilitate the efficient functioning of your rapidly expanding company.

Payroll Outsourcing Services Frequently Asked Questions

When searching for a payroll company, you may have a few questions, and we’ve provided some answers.

Put simply,

what is payroll outsourcing?

Most proprietors of lesser establishments outsource their payroll services.

Instead of hiring a full-time payroll specialist, it may be more cost-effective to use a third-party payroll program to handle employee and contractor payments.

There are many advantages to outsourcing payroll for companies of any size and their employees. Many businesses will even give you your money back if you’re unsatisfied with their services, so you know you can trust them.

Do tax guarantees exist from payroll services?

Many payroll outsourcing services provide a tax protection guarantee, similar to what you get when you file your taxes with an accountant and receive extra support from them during an audit by the IRS.

If you are unsure of the most up-to-date IRS regulations, it is highly recommended that you use payroll tax administration services.

What is the difference between PEO and payroll outsourcing?

There is some overlap between PEOs (Professional Employer Organizations) and payroll outsourcing firms. PEO services, including human resources services and benefits administration for W-2 employees, are also typically provided by outsourcing firms.

One of the best PEO services out there, Paychex offers the whole gambit regarding payroll and human resources perks.

To what extent do the best payroll outsourcing firms share common characteristics?

There are many options for payroll software providers, but you should narrow your options down to those that meet specific criteria.

You should make sure the company you hire provides:

• Clear pricing
• All U.S. states and territories tax withholding and payment license
• CFP payroll expert
• Deposits 24/7 (and mailed checks or prepaid cards if you offer physical payment)
• 401k and healthcare benefits
• Mobile pay (so you can schedule payments when you travel)
• Fees and penalties

If you stick with businesses with these traits, you can rest assured that your payroll is in good hands, and there will be no issues that you will face.

Why is it a good idea to use a payroll outsourcing service?
Using a payroll outsourcing service provides several benefits that simplify managing one’s finances.

A few examples are as follows:

• Automatic tax and benefit withholding
• Pay Stubs and Accounts
• Employees” and contractors’ W-2s
• H.R. services include onboarding paperwork
• Payroll reports customized

Is it possible to use a payroll service to pay freelancers?

Yes! A payroll company or payroll software can help you pay your freelance workers. Companies of all sizes can benefit greatly from this feature.

In addition, if your company has expanded to the point where you require a sophisticated payroll service, you can pay your independent contractors with direct bank deposits.

Many independent contractors prefer direct deposits because they save money by avoiding third-party service fees.

The Final Takeaway!

According to small business owners, the payroll process can be one of the most tedious administrative duties.

Payroll outsourcing services can process payroll and take care of all the necessary tax and benefit withholdings on your behalf, freeing up your time to focus on other areas of your business.

Don’t spend your time on bookkeeping rather than growing your business. Outsourcing payroll is a smart move, whether you have independent contractors or W-2 employees. Get in touch with us at hello@ud.web-stage.in today!

Payroll Deductions in 2022

First of all, take a minute to recall your first paycheck. You might remember some shock in seeing how much your check was significantly less than the amount you earned. Your manager has reduced your pay with various payroll deductions for different taxes.

As a business person, you will keep taxes from your workers’ pay and deposit that money with the proper tax organizations. You will also pay specific taxes from your assets based on what you pay your workers.

What are payroll taxes?

What is payroll deduction? The taxes you are required to keep and those you must pay to contain your payroll taxes. Money is withheld incorporate government, state, and perhaps local income taxes, and one portion of the FICA charges Social Security and Medicare.

The amount paid directly from business funds includes the other portion of the FICA taxes, government and state unemployment, and, in certain states, inability insurance tools. Here are some of the solutions to solve the payroll deductions mystery.

Employee classification

The characterization of people the organization will pay should be very clear since payment varies based on that. There are various sorts of people who work for the organization. They falls in categories like regular workers, part-time laborers, casual workers, contractual workers.

Some might be recruited only for their ability and on a project basis, while some might be recruited for a pre-chosen limited time. In this classification, some are paid in a single amount, while some are paid for the number of hours they commit to the organization. Based on this information, the payment of the workers will differ. There may be mistakes in mandatory payroll deductions while managing such broadened payrolls.

Eliminate human error

Normal payroll mistakes are human mistakes that any entrepreneur would be able. Maybe you give a worker a reward gift voucher and forget to record it on the payroll. That well-intentioned award can entirely affect your worker if not recorded in their pay. Manually handling payroll isn’t simply tedious.

Think about the number of hours spent pulling data from different sources, like your bookkeeping pages, timesheets, and banking data. Manual payroll can prompt miscalculations, oversights, and even missing key information. Additionally, that makes record keeping and association harder.

Instead, utilize your cherished famous payroll software and incorporate it into your time tracking software. With only a few clicks, you can run an accurate payroll. As a bonus, these tools essentially decrease the time spent on managing employee timetables, timesheets, and payroll from hours to minutes for every month.

Increase security

As a supervisor, you are searching for ways to keep your staff and your business safe. And security is a major issue when it comes to payroll. Manually finance will leave your business vulnerable to payroll fraud, like identifying theft and asset misappropriation. Fraudsters from an external source can also take worker tax and salary information if the business doesn’t have a proper safeguard set up.

Involving cloud-based solutions for time tracking will incorporate payroll administrations to mitigate security chances. These suppliers have progressed safety efforts in places like two-factor verification, data encryption, and security certifications to guarantee your information is appropriately stored and protected. Also, most payroll suppliers have built-in security features that can alert your business of payroll funds.

Absence of documentation

While running an organization of so many individuals, a business can’t deny customizing a huge number of things for them. Yet, customization brings confusion which can bring about payroll issues. Various workers follow different strategy returns.

The most effective way to manage that is to ensure that the documentation is intact and there are no flaws. The authoritative staff should do the documentation manually for small organizations, yet bigger organizations. This has to be managed with innovative support, which would acquire accuracy and productivity.

Technology mistakes in programming and storage

While small organizations will manage processes manually, enormous organizations will have software to do that. If the software is stacked directly on the day of payroll handling for many workers, there are chances of the software crashing. Consequently, it becomes vital to plan the calculations and deductions well in advance and handle those.

Timesheet of workers

Corporations will lean toward recruiting workers all around the world for their expertise. They may be working in various time regions also. Yet, organizations with strict rules and policies regarding the number of hours put in for the effort have their payroll method.

If there is a mistake in estimating the number of hours of a specific employee, it will prompt a mistake in handling the payroll deductions. To avoid workers’ timesheet and their signing on time and to log out, time must be maintained, and the number of hours they have worked for should be determined daily or weekly.

Absence of workers

Depending upon the characterization of the workers, there are various strategies for granting leaves. Permanent workers have more leaves than private workers, who are contractual workers. Many organizations have various strategies for allowing maternity and paternity leaves, period leaves, etc. This part is inclined to payroll mistakes.

To avoid these mishaps, you can maintain proper documentation. It is also needed along with the number of leaves taken and the number of paid people.

Lawful deductions

Deductions can be made from workers’ income for additional leaves, and different costs like a fine is another error-prone region. In the case, the reasons must be expressed to the representatives.

The way to avoid any confusion at the time of deduction is to get timely documentation of these deductions when they happen and not keep it pending until the time has come to deal with the payrolls. The staff can maintain this document in dedicated software. Also, they can save the copy on cloud to save money.

Overtime payments

When workers are workers for overtime, there are various approaches to manage those payments. Some payments are managed by reducing the directions, while some get calculated as extra payments. This strategy depends upon organization to organization. A few organizations will calculate the number of hours the workers have extra time. The rate of additional time pay is also unique.

Bottom line – Payroll Deductions

Finally, to reduce these issues, first, you have to understand the organization’s policies, and then you have to consider them while calculating the payroll because it is important. Get payroll services from Unison Globus’s expert payroll team.