Did you ever have a teacher tell you that there is no such thing as a dumb question? The concept is very familiar to most of us. Still, we find clients have questions about payroll processing they are afraid to ask out of some displaced guilt about not already knowing the answer. The wisdom of our school teachers aside, we believe it is important that no payroll question go unanswered.
If you have a question about anything having to do with payroll processing and the services you receive from BenefitMall, by all means ask. You cannot get answers otherwise. We promise that no one here on the BenefitMall staff will treat your question with incredulity or disdain. Trust us when we say we that have probably answered your question for another client already.
In the meantime, here are five payroll questions you might be afraid to ask, along with their answers:
1. What do payroll taxes cover?
Payroll taxes are separate from the income taxes workers are responsible for. Payroll taxes can be summed up in the FICA acronym – FICA stands for Federal Insurance Contributions Act. The payroll taxes employers withhold and submit along with their own contributions go to pay for Social Security and Medicare programs for retirees. Monies paid into the system go to cover the current expenses of both programs.
2. Do Social Security and Medicare taxes have different rates?
Yes, Social Security and Medicare taxes are assessed at different rates. For the current tax year, Social Security is taxed at 6.2% of a worker's wages for both employer and employee, equaling 12.4% combined. Medicare is taxed at 1.45% for both employer and employee, for a total of 2.9%. Note that Social Security taxes are subject to a base rate limit while Medicare taxes increase by 0.9% on wages or salary in excess of $200,000.
3. What is FUTA?
FUTA is another government acronym. It stands for Federal Unemployment Tax Act. When companies pay FUTA tax, they are paying into the federal unemployment system. Paying FUTA does not exempt employers from maintaining unemployment insurance as dictated by state regulations.
4. How does a company calculate payroll tax liabilities?
FICA taxes are set in stone from year to year. Employers can simply check with the IRS to get the rates. As for state payroll taxes, it is up to employers to check with their own state taxing authorities to learn what is required. The good news is that payroll taxes do not change drastically from year to year.
5. Are wages and salary different?
Though we have a tendency to use the terms 'wages' and 'salary' interchangeably, they are different for tax purposes. Wages are monies paid to workers based on an hourly rate. Salary is compensation paid on an annual basis, regardless of how many hours an employee works. Salaried workers do not necessarily have to be paid for overtime if they make a certain amount.
Consider a BenefitMall Payroll Solution
In this post, we have endeavored to answer five common payroll questions that employers are sometimes afraid to ask. We will follow up with five more questions in our next post. Until then, we invite you to consider a BenefitMall payroll solution if your company is still handling payroll and benefits administration in house.
We offer full-service payroll solutions that cover everything from time and attendance to processing payroll on your schedule. We offer cloud-based solutions for small businesses that want to share some of the responsibilities of payroll processing with this. We even have customized solutions for the construction and restaurant industries.
Also, check out our other blog with 5 more frequently asked questions!