The 411 on Payroll Taxes

Hiring employees is an exciting milestone for small and growing businesses. But managing withholding and payroll taxes takes time and expertise you don’t have.

Withholding and remitting federal, state and local income taxes, Social Security and Medicare taxes and unemployment taxes, along with managing benefits, becomes overwhelming as businesses grow.
You should consult a professional and reliable payroll service provider (like us!). But you should keep a few other things in mind.

Getting Started with Payroll Taxes

Every employer needs an EIN number, and employees need to fill out several forms before they begin work:

  • Form I9: Verification of eligibility to work in the United States
  • W4: Federal withholding form
  • W2: Wage and tax statement

State Tax Regulations

Tax regulations vary from state to state. So be sure to check with your local government for the latest employer tax guide and regulations. For example, California has four state payroll taxes.

Federal Tax Rates

When calculating payroll taxes, make sure to use the most up-to-date tax rate. For 2017, the Social Security tax rate did not change from 2016 (6.2 percent for employer and employee). And the Medicare tax rate also remains the same at 1.45 percent for each. offers additional federal tax rate guidelines.

Avoiding Penalties

Withholding errors or missed deadlines can cause additional fees and penalties. Avoid payroll tax penalties by keeping up with employment tax due dates on the IRS website.

Fortunately, a professional payroll service provider can help you keep track of deadlines, automate payments electronically, and submit payments on your behalf.

Employer Tax Credits

Employer tax credits can save your business thousands of dollars each year with new and existing tax credits. For 2017, a few specific areas can save you a tremendous amount of money.

  • Small Business Healthcare Tax Credit – If you have fewer than 25 full-time equivalent employees making an average of about $50,000 or less, you may qualify for the Small Business Healthcare Tax Credit, saving you up to 50% of the cost of premiums.
  • Research and Development Tax Credits – The PATH Act helps to make R&D tax credits permanent, allowing businesses with less than $50 million in gross receipts to offset the credit against AMT liability. Additionally, it allows businesses with less than $5 million in gross receipts to offset up to $250,000 the credit against payroll taxes instead of income tax liability.
  • Tangible Assets – Have you made significant property improvements to your business in 2017? Tangible property regulations help you determine if your improvements are eligible for a write-off or credit.
  • Energy Efficiency Tax Credits – provides a list of the most recent energy efficiency tax credits for businesses and commercial buildings.
  • Work Opportunity Tax Credit – Available at the federal and state level in some cases, the WOTC provides tax incentives to businesses that hire employees who face barriers to employment. Also, the Empowerment Zone Tax Credit (EZTC) provides a significant savings opportunity, so be sure to check if your business falls into this category.

The 411 on Payroll Taxes

With the tax year half over, you should get organized and ensure tax planning includes the latest savings opportunities. But by claiming these credits and write-offs, your company can increase cash flow, for one. And you can get on a firm path for growth and expansion throughout the rest of the year.

The 2017 tax guidelines can provide a significant cash flow opportunity for small businesses. And especially those that are in a growth phase and using new technologies, applying energy-efficiency standards or engaging in research and development. The government is continuously interested in stimulating innovation and the economy. So, you should expect more savings to be passed down to businesses in the future.


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