Our state is pretty interesting; that’s a nice way to lead into employment and taxes when it comes to our business. This time around I’m talking about taxes for our employees. There are specific types of taxes I want to bring to your attention in case you’re looking to hire at least one person to work for you… legally that is. 🙂
Let’s begin with this reality; if you hire an employee and put that person on the payroll, you already know there are taxes that need to be taken out for both federal and state tax divisions. That’s not a surprise to anyone who pays taxes themselves… which is every single person who’s ever had a job.
What you may not know is that employers have to pay some of the same taxes that employees do… and some taxes that they don’t.
Let’s start with Social Security and Medicare. Known as FICA (Federal Insurance Contributions Act), both of these come out of your employees pay and they come out of you as the employer also. It’s the same exact amount for each of these, which makes it easy to calculate if you’re handling your own payroll, which for 2017 is 7.65%. Both of these are federal, and since it’s probable that you’re going to reach the age one day when you’ll get your bit out of the pool, you can see this as a good investment towards your own future.
The two taxes you might not be fully aware of are federal and state unemployment. These aren’t taken from the employee; only the employer. That’s because employees who lose their jobs and qualify for unemployment insurance end up having to pay taxes on that money as income later on.
Luckily, the rates aren’t that high and, for any employer paying for a full time employee, you don’t have to pay it all year long. However, the language gets a bit tricky.
For instance, the federal unemployment rate for 2017 is 6.0%… unless you live in a state that also collects for unemployment insurance like New York. Because New York has unemployment taxes, its employers get a discounted rate. For 2017 the rate is 4.1% up to the first $10,700 in employee earnings. After an employee has reached that limit for the year, the employer doesn’t have to pay anything more until the new year.
Remember that the actual federal unemployment rate is 6%? In New York for 2017, the rate is 10% of that rate, or .6%, up to $7,000 in employee income. Once again, once that rate has been reached the employer is good until the beginning of the new year.
There you go. Of course, two ways to help you do this if you don’t have the time or feel comfortable is to either work with an accountant or payroll service. Both will give you great guidance as well as relieve you of a lot of stress.