Deciding to hire employees and having a payroll is a big decision for small businesses. This can add new complexities to a business’s accounting system because the business will not only have to pay the employees, but the business has to pay federal employer taxes and state unemployment taxes. Due to this additional complexity, it helps to go through an accounting firm that offers payroll services.
Payroll includes the following elements. There are wages, which is the gross amount (amount before any withholding for income taxes or payroll taxes). Federal income tax withholdings are another component of payroll where the employer takes part of the employees pay and sets it aside for the income tax bill. There are also employment taxes, usually, this is referred to as FICA taxes. FICA taxes are made up of Social Security taxes and Medicare taxes. Employees and employers pay 6.2% and 1.45% for these amounts.