What Are Payroll Taxes Used For

Wages In Lieu Of Termination Notice

When you pay an employee an amount in lieu of termination notice under the terms of an employment contract or federal, provincial or territorial employment labour standards, the amount is considered employment income, whether or not it is paid on termination of the employment.

Deduct CPP contributions, EI premiums, and income tax. To determine the amounts to deduct, include the wages in lieu of termination notice with the regular income, if any, for the pay period.

Use the bonus method that we explained under Bonuses, retroactive pay increases, or irregular amounts to determine the amount of tax to deduct from the wages in lieu of termination notice.

For more information, see archived Interpretation Bulletin IT-365, Damages, Settlements and Similar Receipts.

Payrolling Of Benefits In Kind

There was an important legislation change for any employers who provide benefits to their employees, and who either report these on forms P11D at the end of the tax year, or who previously taxed these benefits through the payroll.

If you intend to payroll benefits and expenses, or if you are doing so already, you must now register them with HM Revenue and Customs using the online Payrolling Benefits in Kind service. If you use this service and payroll benefits and expenses, you will not have to report them on a P11D. Any unofficial payrolling of benefits schemes can no longer be used, and approval for these schemes is now required. As of the 2016/2017 tax year, HMRC stopped accepting informal reports of employee benefits, sometimes referred to as lists.

If you use this service, the only benefits you will not be able to payroll for the 2021/2022 tax year are:

• Employer provided living accommodation
• Interest free and low interest loans

If you have previously been payrolling these benefits informally, you can continue to do so but you must still report them on a P11D.

You can choose to account for the tax on the Benefits in Kind, you provide to your employees through PAYE each payday.

You will need to register before 6th April to start payrolling for the following tax year. This is because HMRC will need to amend your employees tax codes in advance to remove any BiKs previously included.

Option 1:

Option 2:

Ei Premium Rate And Maximum

You have to deduct EI premiums from your employees insurable earnings. As an employer, you must contribute 1.4 times* the amount of the EI premiums that you deduct from your employees remuneration.

Each year, we determine both of the following:

• the maximum annual insurable earnings from which you deduct EI
• a premium rate that you use to calculate the amount to deduct from your employees .

Note

Different EI rates apply for employees working in Quebec because of the Quebec Parental Insurance Plan . See Employment in Quebec.

Example

$273.70

$469.20

You stop deducting EI premiums when the employees annual earnings reach the maximum insurable earnings or the maximum employee premium for the year .

The annual maximum for insurable earnings applies to each job the employee holds with different employers . If an employee leaves one employer during the year to start work with another employer, the new employer also has to deduct EI premiums without taking into account what the previous employer paid. This is the case even if the employee has paid the maximum premium amount during the previous employment. If your business went through a restructure or reorganization, see If you change your legal status, restructure or reorganize.

The employees EI premium rate for the next year can be found in the Payroll Deductions Tables, which are usually available in mid-December at Payroll.

Notes

Example

Hassans maximum premium is calculated as follows:

Total insurable earnings

$759.56

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Are There Other Federal Payroll Taxes

In addition to FICA or SECA taxes, a few other payroll taxes are levied on certain employees:

• Federal Unemployment Tax Act taxes are only paid by employers, at a rate of 6 percent for the first $7,000 of earned income per employee. FUTA taxes support funding for state-administered unemployment insurance programs.
• Railroad Retirement Act taxes are paid by railroad employees and employers to fund retirement programs for railroad workers.
• Other payroll taxes are mostly comprised of taxes paid by federal employees to fund their own retirement programs.

Employee Or Independent Contractor

Before you can determine how payment for your services will be treated in terms of payroll taxation, you must determine if you are an independent contractor or an employee for purposes of the work in question.

Independent contractors are people such as lawyers, accountants, architects, contractors, or subcontractors who follow an independent trade or profession in which they offer their services to the public. However, whether such people are actually employees or independent contractors depends on the facts of each particular case. Traditionally, anyone who performs services is an employee if the company or person paying for those services can control the details of how the services are to be performed. Facts indicative of the employment relationship include:

• Instructions as to when, where, and how to perform the work
• Payor-provided training
• Payment by the hour, week, or month and
• Payment of employee-type benefits such as insurance, vacation, and retirement benefits.

Facts indicative of an independent contractor relationship include:

• Emphasis on results
• Investment by the worker in work facilities
• Payment by the job rather than by time period and
• Extent to which the worker can realize a profit or loss on the transaction.

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What Is The Purpose Of Payroll Taxes

Your remitted Social Security tax is sent to the Social Security Trust Funds. Social Security taxes fund benefits for individuals who are disabled, retired, or are children of deceased workers. Medicare taxes are applied to the Hospital Insurance Trust Fund. This trust fund helps pay for Medicare Part A and the administration of the Medicare Program.

Square Payroll Review: Administration And Accounts

If youve ever used the Square POS before, youll know that the company has a lot to offer when it comes to helping you make the most of your teams. In-built into your Square POS and your Payroll strategy are a bunch of user-friendly administration features.

For instance, on the Team Management side of your POS online account youll find the option to access real-time reports that help you to optimize your staffing strategy. You can also manage your employees timecards, keep a close eye on benefits, and even manage tips.

Within the Square Payroll software itself, you can not only pay your employees on-time and as accurately as possible, but you can also create the environment thats most suitable for your business. Square Payroll allows you to choose between paying salaried or hourly employees.

You can also:

• Run payroll at multiple times per month with no extra cost
• Pay your employees using manual check or direct deposit
• Accommodate various pay rates according to the needs of your employees
• Process state taxes and calculate overtime
• Administer employee benefits.
• Calculate workers compensation and information for W-2 employees
• Integrate with square point of sale tools and employee timecards

Another great feature?

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Important Payroll Tax Due Dates

Employers must follow a series of strict due dates in order to avoid incurring penalties from the IRS. Those due dates include:

• File Form 940, which explains the Employers Annual Federal Unemployment Tax Return. If you have already deposited all of your FUTA tax when it was due, then you have 10 additional calendars days to file Form 940.
• File Form 943, which details the Employers Annual Federal Tax Return for Agricultural Employees. If your business paid wages to any farmworkers, and those wages were subject to social security and Medicare taxes, then youll need to fill out Form 943.
• File Form 944, which covers the Employers Annual Federal Tax Return for the previous calendar year. Form 944 is only required if the IRS has notified you in writing to submit Form 944. Otherwise, proceed with a normal Form 941 statement, which is the Employers Quarterly Federal Tax Return statement due by April 30, July 31, October 31, and January 31.
• File Form 945, which covers the Annual Return of Withheld Federal Income Tax. This form is used to report any non-payroll income tax that was withheld in the previous year. Just like with Form 940, employers have 10 extra days to file Form 945 if they have deposited all taxes when due.
• File Form W-2, which is the Wage and Tax Statement and reports all wages, tips, and compensation paid to an employee during the previous calendar year

Employment In Canada By Certified Non

There is an exception to the withholding tax obligation for qualifying non-resident employers when they pay amounts to non-resident employees for performing the duties of an office or employment in Canada. In other words, a qualifying non-resident employer paying a qualifying non-resident employee working in Canada will not be required to withhold and remit any amount of tax to the CRA. For more information about the certification process or your obligations as a qualifying non-resident employer, go to Non-resident employer certification.

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How To Determine How Much Payroll Tax To Withhold

Here’s how it breaks down:

• Social Security. Each employee pays 6.2% of their paycheck, and the employer matches the tax for each employee. A cap sets a maximum for social security taxes any earnings above $142,800 are not subject to social security tax.
• Medicare. The employer and the employee each pay 1.45% of the employees gross salary into Medicare, the government health care system that covers most retired workers. Employees who make more than a certain amount pay an additional 0.9% in payroll taxes employers don’t have to match the added 0.9%. The combined total rate that both employer and employee pay in FICA taxes is 15.3% of gross wages. Employers must withhold this amount from every paycheck and pay it to the government by the required due date.

When You Must File W

Employees rely on their W-2 forms to get accurate information for filing their taxes and they must include copies of their W-2 when filing their taxes with the IRS. This is also true for online W-2 filing. Employers need to ensure that employees get their forms with adequate time to perform these tax requirements.

As mandated by the SSA, employers must furnish employee W-2 forms online so they can be accessible by Jan. 31. Additionally, employers must file each employee’s W-2 with the SSA by Jan. 31. If Jan. 31 falls on a weekend or legal holiday, employers have until the next business day to file with the SSA. Per the IRS, if an employer is posting the W-2 online on a website portal, it must be posted for the employee to access it on or before the January 31 due date through October 15 of that same year. You will also need to file employee W-2 forms online with state or local taxation agencies if you withheld respective state or local taxes from your employee’s wages.

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How Do You Determine How Much Income Tax You Should Withhold

Your employees make a lot of the decisions here. They’ll use Form W-4 to decide how much they want to have withheld, based on their household and personal financial circumstances. You’ll need every new worker to fill out a Form W-4 then, you can use that information and the employee’s earnings to calculate how much tax to deduct.

Even though you’re not paying the employees tax for them, it is important to manage the withholding correctly and ensure that the proper amount is sent to the IRS. Check out the IRS’s Publication 15, Employer’s Tax Guide, for more information about payroll and income taxes and your responsibilities as an employer. You can also use the online Tax Withholding Assistant tool on the IRS website to help you create a spreadsheet that calculates the right amount of federal income tax to deduct for each employee.

Income Tax & Social Security In Ghana

In Ghana, the tax year runs from 1 January to 31 December.

Domestic taxes are administered by the Domestic Tax Revenue Division of the Ghana Revenue Authority. Some of the domestic taxes being administered by the DTRD include:

• Corporate Tax: This is the tax paid by companies on their profits in the year. The tax rate is 25%. Mining and upstream petroleum companies pay corporate tax at a rate of 35%, while companies principally engaged in the hotel industry pay a reduced rate of 22%. The CIT rate for companies engaged in non-traditional export is 8%, while bank lending to the agricultural and leasing sectors pay a CIT rate of 20% on income from those business.
• Capital gains are included as part of business income and taxed at a rate of 15%. Capital gains tax is assessed on gains realised on the disposal of chargeable assets such as: buildings, businesses, business assets, land and shares.
• Other Taxes:

Value Added Tax

Apart from the exempt goods and services, VAT of 12.5% is charged on goods and services made in Ghana and every imported good. A VAT rate of 5% on the supply of immovable property by an estate developer has now been introduced.

National Health Insurance Levy

Apart from the exempt goods and services, VAT of 2.5% is charged on goods and services made in Ghana and every imported good.

Special Petroleum Tax

Licensed oil marketing companies have imposed a special petroleum tax of 17.5% on the supply of specified petroleum products.

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The Election To Apply The Research Tax Credit Against Payroll Taxes

Tax Attorney | Wills, Trusts and Estates Attorney | Estate Planning | Business Formation & Planning

The credit for increasing research activities, often referred to as the research and development tax credit, is a valuable tax break available to eligible businesses. Claiming the credit involves complex calculations. But in addition to the credit itself, the research credit also has two features that are especially favorable to small businesses:

Lets look at the second feature. Subject to limits, you can elect to apply all or some of any research tax credit that you earn against your payroll taxes instead of your income tax. This payroll tax election may influence you to undertake or increase your research activities. On the other hand, if youre engaged in or are planning to undertake research activities without regard to tax consequences, be aware that you could receive some tax relief.

Why the election is important

Eligible businesses

To qualify for the election a taxpayer must:

• Have gross receipts for the election year of less than $5 million and
• Be no more than five years past the period for which it had no receipts .

Limits on the election

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How To Pay Payroll Taxes For Your Employees

Now onto the big stuff. How to calculate payroll taxes, how to pay payroll taxes, and how to avoid an unfortunate run-in with the IRS.

The basic process runs down as such:

1. Calculate your employeeâs payroll tax.

2. Withhold employee and employer funds.

3. Report tax to federal and other relevant agencies.

4. Deposit taxes by the due dates.

If that sounds basic, we know that, as with most things, how to pay payroll taxes is easier said than done, so letâs get into the details of each step.

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Square Payroll Review: Ease Of Use

Investing in a team payroll processing solution like Square Payroll is a way for companies to make their lives a little easier. Instead of having to track the amounts you owe your staff manually, you can trust software to do most of the hard work for you.

So, how simple is Square Payroll to use?

Well, at its core, Square Payroll was designed to give smaller companies access to all the significant corporation benefits they need when it comes to managing payroll. Getting started with the software is incredibly straightforward. If youre switching from another payroll company, Square will even handle the paperwork and legal stuff for you.

To get started, all you need to do is enter the information thats relevant to your team or ask your employees to set up their own personal accounts. You can then set up your Payroll system on the square dashboard to automatically deliver cash to your employees at the same time each month.

For ease of use, its hard to find a competitor that comes close to Square.

Square even makes the process easier by managing your withholding and payroll tax filings on your behalf. If that wasnt compelling enough, the fact that Square syncs with your existing point of sale system and time cards means that everything works seamlessly together within the financial side of your business. Theres less of a need to waste time jumping between tools and apps.

Do You Need To Register For A Payroll Program Account

You need to register for a payroll program account if you meet any of the following conditions:

• pay salaries or wages
• pay bonuses or vacation pay
• provide benefits or allowances to employees
• need to report, deduct and remit amounts from other types of remuneration

If you need a payroll program account and you already have a business number , you only need to add a payroll program account to your existing BN. If you dont have a BN, you must ask for one and register for a payroll program account before the date your first remittance is due.

For more information on the BN and CRA accounts, or to register online, go to Business number registration.

Payroll deductions can be complicated. If you are having trouble with them, go to Payroll or call 1-800-959-5525.

Contacts and authorized representatives

As a business owner, partner, director, trustee, or officer of a business, you can authorize representatives, including your employees, an accountant, a bookkeeper, a lawyer, a payroll provider, or a firm, to act on your behalf.

You can authorize a representative by submitting an authorization request online through Represent a Client.

For more information, go to Help with representing a Client.

Employment in Quebec

If the employee has to report to your place of business in Quebec or you pay the employee from your place of business in Quebec, different regulations and employer responsibilities apply.

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