Navigating the complicated payroll tax system can be a tall order for even the best-equipped HR departments but failing to follow the requirements correctly can result in a hefty fine from the IRS. Complex payroll tax regulations and deadlines are constantly changing. Most tax agencies now require electronic tax payment and filing. There are many opportunities for errors when filing payroll taxes. Penalty and interest charges related to late tax payments are very high.
Our goal with LBMC Employment Partners, LLC, (LBMC EP) Payroll Tax Outsourcing is to provide growing companies with 100% accurate, cost-effective payroll tax solutions. We want to provide you with peace of mind and reduced risk in the complex area of payroll tax compliance.
Our program provides complete payroll tax processing including:
- Increased payroll tax efficiency for your company.
- Compliance with thousands of federal, state, and local deadlines, as well as all payroll and tax regulatory issues.
- Payment of all payroll tax liabilities on due date. Filing of all required payroll tax returns on behalf of customer.
- Automated systems and calendars to ensure no filing dates are missed.
- Response to all tax agency inquiries, including quick turn-around, tax agency follow-up, and thorough client communication.
- Tax specialists with years of experience and training in payroll taxation. Our program provides a specific point of contact for all payroll tax issues.
What Exactly Are Payroll Taxes?
To put it simply, payroll taxes are the taxes that you, as an employer, are required to withhold from employees and to pay directly to government agencies. The withheld amounts include: federal, state, half of FICA (Social Security and Medicare) taxes, and possibly local income taxes. Paid amounts include the other half of FICA taxes, federal and state unemployment taxes, and, in some states, disability insurance taxes, and are paid directly from the employer’s funds.
Since 2016, there was an increase in the Medicare taxes for employees that earn over $200,000 per year. The employer is required to withhold an additional $0.009 tax on the wages over the $200,000. The employer does not have an additional tax on these wages over $200,000. It is an employee tax only.
5 Steps to Managing Your Payroll Taxes
The best thing you can do to effectively manage your payroll taxes is to make all your payments when they are due. If you’re late, you’ll get hit with costly penalties. With that in mind, here are five other steps to managing your payroll taxes effectively.
Step #1: Understanding Who Your Taxable Workers Are
You need to determine which of your workers are truly employees and which are independent contractors. Payroll taxes are only required for true employees. If you need to freshen up on the difference between the independent contractors and employees, check out our blog here . Typically, if a worker is economically reliant on you, they are then considered an employee. Other factors for employment include the degree of control you exercise over the worker like when, where, and how the work is done.
Step #2: Determine What Compensation is Taxable
After you have determined which workers are employees, you then need to determine which forms of employee compensation are taxable and which forms reduce the amount of taxable compensation. Aside from the obvious basic wages and salaries taxes, other compensations you’ll want to consider are: expense reimbursements, tips, health and life insurance, fringe benefits, bonuses, non-cash payments, and premiums.
Step #3: Determine Which Payroll Taxes Apply
Knowing the types of tax obligations that arise when you have employees and learning how to compute and pay the amounts that must be paid is crucial to successfully managing your payroll taxes. The IRS Publication 15, (Circular E) Employer’s Tax Guide can help you understand your federal tax obligations, or, if you need someone to explain it in more layman’s terms, contact your local LBMC representative.
Step #4: Familiarize Yourself with Payroll Tax Returns and Payments
IRS Publication 15 can also teach you about the forms, returns, filling, and payment procedures for your payroll taxes. It’s important to be aware of deadlines and be sure to mark important dates. Be sure to note that payment and filing schedules often differ, and unemployment taxes are reported and paid separately from income tax and FICA payments. You’ll incur some pretty hefty fines if you fail to make payments or file timely returns.
Step #5: Determine Your Self-Employment Taxes
If you don’t hire anyone to work for your business, you are always going to have at least one employee — yourself. Incorporating yourself will make a big difference in your taxes, and if you do so, you’ll likely have all the tax responsibilities as if you had hired another employee. If you are a sole-proprietor, you’ll have to pay estimated income tax and self-employment (SECA) taxes.
If you need guidance in effectively managing your payroll taxes, contact your local LBMC Employment Partners’ representative. As one of the top payroll companies in Tennessee, we’ll help guide you through each and every step of the way—from managing payroll to outsourcing payroll to payroll tax services—ensuring that you are in compliance with all tax codes. Not only that, but working with LBMC EP will help you avoid penalties: your payroll taxes will be filed correctly and on time.
Payroll Tax Consulting Services
LBMC EP offers a complete line of Payroll Tax Consulting services. These services include:
- Complete response and resolution of payroll tax issues, including written/verbal correspondence with tax agencies, penalty abatement requests, complete follow-up with tax agency until resolution, and thorough client communication.
- IRS representation and negotiation services, including abatement requests, appeals, and installment agreements.
- Review of current payroll tax processes and recommendations to increase accuracy and efficiency. Areas of opportunity include:
- Electronic tax payments to save time and reduce risk of penalty.
- Set-up of required electronic tax filing to ensure compliance.
- Balancing techniques used to reconcile payroll system and tax payment data.
- Written documentation of payroll tax procedures.
- Specific recommendations to overall process.
- Analysis and payroll tax recommendation due to company growth, merger, and acquisition, such as experience rate transfer, new jurisdiction compliance, successor/predecessor opportunity, Form W-2 processing and reconciliation, and related payroll tax savings.
- Completion, submission, and follow-up of new payroll tax account applications.
- Research of state and local withholding requirements for new companies and/or employees.
- Training of new and existing payroll tax personnel.
Our Payroll Tax Consulting group has years of experience and training in payroll taxation. We eliminate the burden of payroll tax filing so you can focus on growth, customers, and products. Let LBMC EP focus on your payroll tax processing so you can focus on growing your business.
Benefits and Features of LBMC EP Payroll Tax Outsourcing
LBMC EP assumes responsibility for accuracy of payroll tax processing. Your exposure to fines, penalties, and even liens due to late filings or payments, is reduced.
LBMC EP keeps current with thousands of federal, state, and local tax jurisdictions and related filing requirements.
Your employee resources are free to focus on serving your clients and growing your business.
LBMC EP will respond to all tax agency inquiries and monitor until resolution regardless of circumstances. LBMC EP utilizes complete electronic payment and payroll tax filing capability. LBMC EP provides detailed client tax reporting and quarterly tax return packages. We also provide amended tax return filing as needed.
Five Major Types of Taxes
- Federal Income Tax: Every citizen must pay federal income tax as determined by their income. This money is deposited to the IRS by the employer.
- State Income Tax: States set their own rules for income taxes. Employers need to know the proper tax rate for each state where they have employees. This can become complicated for remote employees who may live in a different state than the company is based in.
- Local Taxes: Some cities, counties, or municipalities may have taxes that employers also need to deduct from their employees’ paychecks.
- Social Security Tax: Both the employer and the employee must pay this tax in order to fund Social Security programs. This tax is a big one, making up 6.2% of the Federal Insurance Contributions Act, or FICA.
- Medicare Tax: This tax goes to pay for health benefits under the federal Medicare program. A portion of an employee’s income must be deducted to pay this tax, and employers also have to pay.
For each of these types of taxes, the employer is responsible for calculating the proper tax amount and making deductions from employee paychecks. Even after the ink is dry on an employee’s carefully tabulated checks, the employer’s work is still not done. Employers must report their taxes on a variety of different tax forms and send the money to the appropriate agency. All of this must then be tracked for the employees’ W-2 forms at the end of the year.
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All content and services on this page are offered by LBMC Employment Partners, LLC. LBMC Employment Partners, LLC, is part of the LBMC Family of Companies and is an independent entity with services and products being provided exclusively by LBMC Employment Partners, LLC.