What Employers Need to Know about Payroll Deductions

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Payroll processing is more than just tallying up the hours of an employee and cutting a check. If you have employees, there are certain payroll deductions that need to be withheld. But, how do you know how much money needs to withhold? It is essential that you understand payroll tax law so that you can calculate these withholdings in the right way. These payroll deductions need to be deposited at certain times to meet federal and state requirements.

Why Do You Need to Deduct Money from Payroll?Payroll Deductions

Each pay period, deductions need to be taken out for both voluntary and mandatory reasons. As a result, the employee will receive a check that is smaller than their gross pay.

Mandatory deductions include things such as federal, state, and local income taxes. Voluntary deductions vary but might include health insurance premiums, retirement contributions, life insurance premiums, or other expenses related to work and benefits.

Legal Requirements for Payroll Deductions

By law, employers are required to withhold payroll taxes including FICA (Social Security and Medicare) as well as income tax. These wages and reports need to be submitted to tax agencies. As an employer, if you fail to pay the payroll taxes, you could face fines and penalties. In addition to paying the wages, you also need to report the totals on Form 941 or Form 944.

State income tax requirements vary depending on your physical location. Your accountant or payroll service provider can help you learn more about your area.

There are times when wage garnishments might need to be withheld as well. When an employee has an unpaid debt and a garnishment is in place, it is considered a mandated deduction. You will receive a court order or information from a government agency with information about the amount that should be withheld and where the money needs to be paid.

A Payroll Service Can Help

Do you have a hard time keeping up with payroll for your company? The best thing that you can do is hire a qualified payroll service to take care of the details. At R&R Payroll & Bookkeeping Services, we are here to offer assistance. Contact us for more information: (951) 296-0412.