Things You'll Need
State revenue agency tax rate
Consult IRS Circular E/Publication 15 for the federal income tax withholding tables. This step is critical to calculating employee federal income tax withholding. You can search for the Circular E online or get it from the IRS website. Notably, the IRS sends an updated version of the Circular E annually to each employer it has on file.
Check the Circular E for Social Security and Medicare tax rates. The rates for these taxes have been constant since 1990, according to the Social Security Administration (SSA). The SSA has the FICA withholding rates on its website. Employers must withhold Social Security tax at 6.2 percent of gross income, up to the annual wage cap of $106,800, and Medicare tax at 1.45 percent of all gross income. The employer pays an equal portion of these two taxes. Self-employed individuals pay the entire amount of 12.4 percent for Social Security tax and 2.9 percent for Medicare tax.
Consult the Circular E for the FUTA tax rate. For year 2009 and 2010,
the FUTA tax rate is 6.2 percent of the first $7,000 you pay to each worker. Employers are not allowed to withhold FUTA tax from employees; only employers pay this tax. If you paid your state unemployment funds timely, you can take a credit of 5.4 percent against your FUTA tax. At this point, your FUTA tax rate is .8 percent.
Visit your state department of revenue website (see Resources) for state payroll tax rates. The tax rates depend on the state. For example, visit the Ohio Department of Taxation website for state income tax and school district tax rates; visit the New York State Department of Taxation and Finance website for income tax rates; and visit the New York City Department of Finance website for city income tax rates. The taxation agency's website should also list your state unemployment wage base and tax rate. If necessary, you can call the agency for your tax rate and for your payroll tax filing and payment requirements. Notably, the taxation department sends employers it has on record the tax rates for each year.