-
Step 1
You must have a withholding account both with the IRS and the state where the payroll is to take place.
Obtain an FEIN by filing form SS-4 with the IRS
File the appropriate form with your local Department of Revenue. -
Step 2
Have a completed W-4 for each employee prior to beginning any payroll.
-
Step 3
Determine the frequency you would like to pay your employees (ie. weekly, bi-weekly, monthly, etc.)
-
Step 4
Use Income tax withholding tables published by the US Treasury and State Department of Revenue to determine the amount to deduct for both state and federal taxes. These tables are based on the gross amount of wages, number of withholding allowances on W-4 and the pay frequency.
-
Step 5
As an employer, you are also required to withhold Social Security and Medicare tax as well as pay the employer contribution. To calculate the employee contribution:
Social Security: Gross wages X .062 = Tax withheld (Employer must match)
Medicare: Gross wages X .029 = Tax withheld (Employer must match) -
Step 6
Forward all taxes withheld to the appropriate tax authority. Deadlines and time frames for tax payments vary depending on liability amounts. Please check with a tax professional to inquire about the requirements and necessary tax forms for your particular situation.
