How to Take Taxes Out of a Paycheck

By Devra Gartenstein
How to Take Taxes Out of a Paycheck

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As an employer, it is your responsibility to collect and remit state and federal employment taxes. This process involves taking taxes out of each paycheck that you write, according to the rates stipulated by each agency, and then sending in these taxes periodically along with your employer reporting forms. The process seems complicated at first, but it gets much simpler--even routine--as you continue to do it over time. Keep careful track of the amounts that you take out of each employee's paycheck, and provide information with their paychecks detailing these deductions.

Provide each employee with a W-4 form to fill out when they start working for you and at the beginning of each subsequent calendar year. This form will specify the number of deductions that they are claiming, which correspond to columns in the tax table that you use to deduct federal income tax from their paychecks.

Calculate your employee's gross income by multiplying their weekly hours by their wage per hour. If your employee receives a salary, their gross income equals the amount of their salary before you deduct any payroll taxes.

Multiply your employee's gross income by .062 to figure their Social Security taxes, and multiply their gross income by .0145 to figure their Medicare taxes. Subtract these amounts from your employee's gross payroll. Set these funds aside in a separate bank account, along with your matching employer's contribution, or simply keep track of the amounts so you don't accidentally spend them.

Find the entry on your federal tax tables that corresponds to your payroll period, the number of deductions that your employee has claimed on their W-4 form, and the amount of income that they have earned during the particular payroll period. Subtract this amount from your employee's gross payroll. Set these funds aside in a separate bank account or simply keep track of them so you don't accidentally spend the money.

Calculate city and state employment taxes according to the schedules and rates of your state and local agencies, such as the Department of Labor and Industries, the Employment Security Department, and your city and state revenue departments. Subtract these amounts from your employee's gross wages, and set them aside until it is time to pay them.

Deposit your federal employment taxes in the bank according to the schedule that the IRS provides for you. Fill out quarterly federal tax forms to reconcile your deposits with your tax liabilities. Fill out all local, state and federal tax forms on time, and send them to the appropriate agencies along with any amounts that you owe.

About the Author

Devra Gartenstein has owned and run a variety of food businesses for more than 20 years. She has published two cookbooks: "The Accidental Vegan" and "Local Bounty." Gartenstein holds Master of Arts degrees in philosophy and English literature.