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    4 Replies Latest reply on Aug 15, 2008 4:08 AM by Hotelman

    How to calculate payroll taxes

    1god4all Newbie
      I recently hired my first employee. How do I calculate the payroll taxes. I live in Tennessee.
        • Re: How to calculate payroll taxes
          Lighthouse24 Ranger

          Welcome to the community. The following website will give you a basic overview:

          Payroll processing is a simple concept with a lot of potentially costly pitfalls -- plus it's difficult to find reliable advice when you run into questions or problems, and you can easily eat up a lot of time administering it when you should be focusing on other things. For those reasons, it often makes more sense for a small business like yours to use an independent service rather than a DIY approach.

          You can enter "payroll" in the Search this site box above and read previous posts about this topic, as well as several members' first-hand experiences with particular services.

          Hope this helps. Best wishes.

          • Re: How to calculate payroll taxes
            LUCKIEST Guide
            How to calculate payroll taxes, Good question.

            It is great to know that your business is growing and that you hired your first employee.
            Hope you hire more as your business grows. Tell us more about your business.
            I am a Quickbooks consultant and YES Quickbooks does payroll.
            There are also many payroll services like A D P and Paychex and others that
            will process your payroll and take care all the taxes and paper work for you.

            Good luck, LUCKIEST

            • Re: How to calculate payroll taxes
              Bookkeeper1 Newbie

              First, I assume you've applied for an Employer Identification Number (EIN). If not then that would be the first step. Go to www.IRS.Gov and complete Form SS-4, Application for Employer Identification Number and submit the form on-line to the IRS. You will immediately receive an EIN. Be sure to keep copies.

              Second, I assume you have also registered as an employer with the State. If not, it would be worth your time to call your State's local office to inquire about: A) setting yourself up as an employer; B) State Unemployment Taxes and Current Rates; and C) State Withholding Tax rates. All States differ and it is important to make inquiries.

              Third, while you are in the IRS website you should print: A) Form W-4, Employee Withholding Allowance Certificate; B) Form I-9, Employment Eligibility Verification; C) if appropriate Form W-5, Earned Income Credit Advance Payment Certificate; all of which your new employee must complete and you must keep on file.

              If you have already done the steps above then you should obtain a copy of the IRS Publication 15, (Circular E) Employer's Tax Guide. This guide will instruct you on calculating taxes and tell you when and how you must make deposits of Federal employment taxes. Then check with your state for their deposit requirements.

              FOR AN EXAMPLE: (The following is a hypothetical example only.)
              Employee A works 20 hours and you pay the individual $10 per hour.
              Gross Wage $200.00
              Less Withholding Taxes as follows:
              .. Social Security Tax @ 6.2% = $12.40
              .. Medicare Tax @ 1.45% = $2.90
              .. Federal Withholding Tax @ $16.00 (Single, No Exemptions)
              .. State Withholding Tax @ $5.00 (Example Purposes Only - all states differ)
              Total Taxes to Withhold: $36.30 (Calculated $12.40 + $2.90 + $16.00 + $5.00 = $36.30)
              The Net Check to the Employee would then be: $163.70

              You should keep a payroll ledger. You will need to complete quarterly and yearly tax forms as required.

              Best of Luck!
              • Re: How to calculate payroll taxes
                Hotelman Newbie

                Here's a simple answer. Go to There is a free service. You key in the all your relevant information and than the payroll amount and it's done. It will give you the info you need. Disclosure: I have never tried this site; however, my friends swear by it. He even told me that many CPA's use it to verfiy info. I hope this helps. Please let me know. Good luck.