How to Calculate Payroll Taxes | Wrapbook

How to Calculate Payroll Taxes

July 29, 2021

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At Wrapbook, we pride ourselves on providing outstanding free resources to producers and their crews, but this post is for informational purposes only as of the date above. The content on our website is not intended to provide and should not be relied on for legal, accounting, or tax advice.  You should consult with your own legal, accounting, or tax advisors to determine how this general information may apply to your specific circumstances.

Last Updated

July 29, 2021

3. Report payroll taxes

A larger part of how to figure out payroll taxes is the process of reporting them to the IRS and state/local tax agencies. For federal payroll taxes, there is a quarterly cycle that keeps you regularly reporting payroll.

For most businesses, you will use Form 941 to report payroll at the end of each quarter.

Quarter end dates:

The Form 941 is due on the last day of the month following the end of the quarter.

Failure to comply with these due dates can amount to significant penalties.

Use the 941 to file quarterly. To be sure your business qualifies, it's always best to consult a tax professional.

For some smaller businesses with small tax liability, the IRS will allow them to file annually. In this case, you will file a Form 944 by January 31.

Unlike FICA payroll taxes, FUTA demands a slightly different reporting schedule. For FUTA, you will report your tax liability on Form 940 and submit it by January 31.

As for state and other local payroll taxes, they can vary state-to-state, but many follow the quarterly reporting deadline. To stay compliant, make sure to stay up to date on your state and local taxes filing and due dates. The benefit of working with Wrapbook is that we handle both federal and state payroll taxes, as well as ensure that both are filed and deposited accordingly.

4. Deposit to agencies

Compared to the sometimes convoluted process of calculating payroll taxes, the question of how do I pay my payroll taxes is much easier.

The key is to know the due dates.

Deposit dates vary based on the amount of your tax liability. Schedule options are semi-weekly, monthly, quarterly, or annually. However, unless you are an incredibly small business, most payments will be paid either monthly or semi-weekly.

This will be determined by your Form 941 filing. To determine which payroll tax due dates apply to your business, read IRS Publication 15.

All Federal IRS deposits can be easily submitted online through the Electronic Federal Tax Payment System. If the IRS has not automatically enrolled you, you can easily create an account. Be sure to have your employer identification number, business bank account, and routing number prior to enrolling. Also, remember to enroll two weeks prior to the payment deadline.

Finally, submit your payment by 8 pm EST the day before payments are due. You will receive a tracking number to keep for your records.

Luckily, how to pay payroll taxes has become easier with online submissions. EFTPS provides an accessible interface.

Questions of 'how do I pay my employees payroll taxes and my business’s tax liabilities' can drift away once you’ve calculated them.

As for FUTA tax, the deposit schedule does not follow the same monthly or biweekly schedule as your other payroll taxes. You will also pay through the EFTPS, but FUTA payments are due for each quarter: on the last day of the following month.

When and how to pay state and local payroll taxes varies. Much like the EFTPS, most states have their payroll processes completely online.

Be sure to stay on top of your state and local payroll taxes. Failure to follow state and local tax regulations can also lead to costly penalties.

Penalties for non-compliance

The IRS does not play around when it comes to your federal tax liabilities. As a business, you are expected to know how to calculate payroll taxes, adhere to payroll tax deposit due dates, and follow tax filing deadlines.

Failure to deposit your payroll tax on schedule or file your Form 941 or other relevant quarterly payroll reports will result in fines that increase based on the length of your delay:

In addition to penalties for late deposits, you can be subject to interest rates on your tax liability. It will accrue until your penalties are paid in full.

If you fail to pay your payroll taxes, you could be subject to a tax lien.**

Ten days after filing your tax forms, if you have failed to pay your liability within 10 days, a tax lien will be filed by the IRS. Money owed to the IRS will supersede all other debt obligations. It will also be on record, affect your credit score, and drastically impede your ability to take out a loan.

With all this in mind, keep up with your payroll! Know your deposit schedule and download our payroll compliance checklist to be sure you stay on top of filing.

When working with a payroll service like Wrapbook, payroll deposits and filing are handled for you, so you don’t have to worry about penalties.

But, what if I’m self-employed?

As your own employee, you’re still going to be wondering about how to pay self-employment tax. When you’re self-employed, you have to be the ultimate multitasker, but don’t stress. We’ve got your back!

How to pay self-employment tax

Self-employment comes with amazing freedoms and power in your work. But it also comes with its own unique challenges.

How to calculate payroll taxes - Self-employment will have you handling a lot of work by yourself. But hey! You’ve got control. Surround yourself with plants and have at it. SOURCE

Self-employed payroll taxes are often referred to as SECA, or the Self-Employment Contributions Act. You are both your own boss and your own employee. However, there is good news. You can deduct the employer equivalent contribution from your gross income when calculating your income tax.

And, of course, you’ve got to file.

For your yearly filing, you will submit your Form 1040 with your calculated income. As for the question of when are payroll taxes due for self-employment, you will need to file and submit your self-employed payroll taxes quarterly with Form 1040-ES.

For deposits, you’ll also pay through the Electronic Federal Tax Payment System.

Self-employment taxes have many considerations. Consult a tax professional.

When you’re lamenting how do I pay my payroll taxes, remember that there is now a huge community of people choosing the freedom of self-employment. There are plenty of self-employment resources to help you along. And luckily, how to calculate payroll taxes is very similar to businesses.

Conquer your payroll tax fear

Trust us, we know it can be incredibly daunting when facing forms and impending deadlines as you are first navigating how to pay payroll taxes.

But once you get the basic steps down, those seemingly endless moments of “how do I pay my payroll taxes?” or “how do I pay my employees payroll taxes?” will become less frequent.

Wrapping up

As a business, you’re handling multiple responsibilities- how to calculate payroll taxes is but one. Luckily, with the expansion of specialized businesses, there are new solutions there to help.

From compliance checklists to payroll services like Wrapbook, take advantage of resources and professionals available to you to help with these often tedious tax and payment calculations.