Outsourcing your payroll and HR in the US means you can focus on business growth in the lucrative American market. Even if you use a payroll management service, it is important to understand US payroll and we give you an overview below.
What are Payroll Taxes in the US?
Payroll taxes in the US are paid based on your employee’s pay and are paid directly to the government.
Payroll taxes are required and fund government programs such as social security, Medicare, and more.
Businesses are responsible for the payroll taxes of their employees and themselves. Using a payroll management service such as that offered by NNRoad ensures your business is in continuous compliance with payroll laws and regulations in the US.
Types of Payroll Taxes in the US
There are three main types of payroll taxes in the US that businesses are responsible for:
- Federal taxes
These are paid to the US government and you will pay and report these taxes to the IRS. The three types of federal payroll taxes are federal income tax withholding, FICA taxes, and unemployment taxes.
- State taxes
State payroll taxes are paid to individual state tax authorities and vary by the state which your employees live and pay their taxes in. In most states, you will report income and withholding taxes to the state’s Department of Revenue and unemployment taxes to the state’s Department of Labor.
- Local taxes
Local jurisdictions often charge their own payroll taxes and again these vary by location and can change greatly depending on where you are located.
Managing each set of taxes can be complicated for those unfamiliar with tax laws in the US. A payroll service provider, such as NNRoad, can take care of payroll taxes to ensure these are paid correctly, in the right amount, and on time in order to avoid legal and financial penalties.
Responsibilities as a Small Business for Payroll Tax Management in the U.S.
Any business with employees is required to ensure payroll taxes are paid by withholding these taxes from employees’ paycheck and making the applicable payments for federal, state, and local taxes.
The taxes usually withheld from employee paychecks include FICA (Medicare and Social Security taxes) and federal, state, and local income taxes, if applicable. Other withholding obligations include FUTA (Federal Unemployment Tax Act) and, in states such as California, Hawaii, New Jersey, New York, and Rhode Island, disability insurance taxes.
When you outsource your payroll, the payroll management service provider ensures all applicable taxes are paid at every level; this helps clear up any confusion as taxes vary by state. There are heavy fines and penalties if you don’t pay taxes so it is important to pay them correctly and on time.
The Best Way to Manage Your Payroll Taxes in the US
Companies can attempt to calculate payroll taxes on their own, although this is not recommended as payroll taxes aren’t so simple.
For calculating payroll tax, you must be fully aware of the actions and decisions each step of the way and how those may impact your employees. You also need to ensure these steps are aligned with government regulations on the local, state, and federal levels.
Finding a trusted payroll management company relieves the burden of figuring out and staying up to date on all payroll issues to ensure you are in compliance. Payroll outsourcing is common for businesses of all sizes and allows you to focus on your core competencies to best grow your business. A payroll service, such as NNRoad provides, simplifies the process and ensures you are compliant.
In conclusion, payroll is not so straightforward and small mistakes can have a big impact on your business and employees.
We highly recommend outsourcing your US payroll to a company like NNRoad. We will take care of payment to your employees, withholding the right amounts, and payroll taxes so you can focus on your business. Reach out to us to learn more about our payroll service in the US and elsewhere.