How To Calculate Payroll Taxes

Knowing how to calculate payroll taxes is something every small business owner needs to know - even if you use an outside accountant or payroll tax service. You never know when you might be required to calculate the payroll taxes for one of your employees quickly; so, here's a guide to help you calculate payroll taxes

Calculating Payroll Taxes

In order to begin calculating payroll taxes for an employee, you'll first need to visit the IRS website and then look for the download section. On the download page, search for IRS publication 15-T. This is the publication that contains the tables needed for calculating your employee’s withholding tax rates. Once you have the publication, follow the instructions on pages 2 through 4 in determining how to calculate withholding rates. You can either use a flat percentage method or use the actual dollar amount table that is included in the publication.

After you have found the appropriate withholding tax rate for your employee, you will need to calculate Social Security and Medicare withholding as well. To calculate Social Security taxes, multiply your employees gross income times 6.2%. For Medicare, multiply your employee's gross income by 1.45%. Once you have these three figures, add them together - and this is the amount that you need to withhold from your employee's paycheck.