April 10, 2019 HCM Consulting Support, Managed Payroll Support, Optimization Support, Payroll & Tax Support

The Ins and Outs of Payroll Tax

The specifics of payroll taxes can be difficult to understand, and mistakes can result in consequences like frustrating late fees and accrued interest. In order to avoid these pesky penalties, it is essential to have a basic understanding of payroll taxes, what they are used for and what types of penalties can occur if you do not follow the correct guidelines. Here, the payroll experts at Wise Consulting break down payroll taxes so you can feel more at ease as an employer.

What are the Types of Payroll Taxes?

As your organization’s payroll expert, you know that taxes taken out of each paycheck go to a variety of resources. For instance, federal income taxes go towards defense and security as well as various social insurance benefits. State income taxes, on the other hand, go towards state resources such as education, health care, transportation, state law enforcement, parks and more.

As your company and its employees pay certain taxes, there are four different types of required payroll taxes to be aware of: federal income tax, state income tax, social security and Medicare, and the employer must pay a federal unemployment tax and state unemployment tax in addition to social security and Medicare.

How Can I Pay Taxes Online?

Employers are required to submit tax filings to the IRS, state tax filings to state agencies and Form W-2s to the Social Security Administration. You can submit payroll taxes online using the Electronic Federal Tax Payment System (EFTPS). This is an easy and efficient way to ensure you are paying taxes on time in order to avoid penalties and late fees.

What are Payroll Tax Penalties?

If payroll taxes are not submitted properly‒or on time‒the organization could end up dealing with late fees and unwanted interest, which is why submitting payroll taxes on time, in the correct amount and in the right way is very important.

According to IRC 6656(b)(1), there is a four-tier policy for late tax deposits, with penalty amounts based on how many calendar days you are late in submitting taxes. If your company is one to five days late, the penalty rate is 2%; for six to 15 days late, the penalty rate is 5%; For payments more than 15 days late, the penalty rate is 10%. Additionally, there is a 15% penalty for all amounts still not paid more than 10 days after the taxpayer receives the first notice requesting tax payment or the day when the taxpayer receives notice for immediate payment. Lastly, it is important to know that there is a 10% penalty on mandatory deposits that are not paid through the Electronic Funds Transfer (EFT).

Consult with a Dedicated Payroll Specialist at Wise Consulting for More Information

While the information above may seem simple, so much more goes into your payroll taxes, especially as your company grows. At Wise Consulting, we know how important it is to understand the ins and outs of payroll taxes so you can feel more educated and secure about where your organization’s money is going, as well as to avoid making critical mistakes in payment.

The payroll management experts at Wise Consulting have the knowledge and experience to help you navigate the complex world of payroll taxes, and by putting your trust into the services of a third-party payroll system, like Wise, the worry of submitting your payroll taxes in the right way is taken off your shoulders. We’ve seen these issues arise time and time again—let us help you avoid them. For more information on how the payroll experts at Wise Consulting can offer extensive expertise in all areas of human capital management and payroll management technology, contact our office today!

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