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What to know about collecting payroll taxes

On: June 26, 2020

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Payroll taxes may seem like a nuisance for those who have to deal with them, but they are a vital part of owning a business nonetheless.  When it comes to collecting payroll tax, there are some easy steps you can take to ensure that everything is alright come time to pay. Not knowing what you are doing or failing to correctly file your payroll taxes when necessary can not only lead to a series of fines you do not want but also to possibly get your business shut down. What to know about collecting payroll tax In California, on top of the numerous federal taxes that you must pay, you also have to pay the state taxes as well. California has four state payroll taxes, all of which are given out by the Employment Development Department (EDD). These taxes are the unemployment insurance (UI) tax, employment training tax (ETT), state disability insurance (SDI) tax, and California personal income tax (PIT). When all of these are added up, it will depend on your business and how much each employee makes but will come out to around 6.2 percent of the total paycheck being taken out for payroll taxes on top of other taxes. Payroll taxes are usually taken out automatically by employers, who are then responsible for paying them to the correct agencies. The employer is the one who must report the earnings and pay them during the required times, which is usually four times a year through a quarterly system. This quarterly system means that four times a year you will submit all the proper and necessary taxes to the EDD in order to successfully operate your business. When you are reporting, it is important to report all wages that are given out to employees. Wages are all compensation for an employee’s personal services, whether they are paid by payroll check, personal check, cash, noncash payments (i.e., meals and/or lodging), and tips. It is also important to keep records of all payroll related items such as time cards, records of payments/payroll records (payroll check, personal check, cash, cannabis, meals, and tips), and any other information that is necessary. It is important to note that employers are required to keep payroll records for a minimum of four years. Be on top of your payroll taxes Not filing on time is one of the most common and major mistakes you can make as an employer. Not only does it not look good, but it can lead to a load of fines depending on the situation which will not make your day any better. If you happen to get audited, it can also look very bad to have a series of overdue payments or late fees added to your account as you go through the process. Learning to keep a good record system is also important as most tax agencies look back at least a couple of years when it comes to your taxes. Always make sure to call Leading Tax Group and don’t attempt to do it yourself.
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