The IRS offers an online tool to help you figure out how much tax you owe. The tool shows the balance for each tax year including the principal amount and any penalties or interest. It also shows payments you’ve made in the last 18 months and your payoff amount.
Federal Income Tax Withholding and IRS Tax TablesThe simplest and easiest way to calculate federal income tax withholding is by using the Circular E tax tables that the Internal Revenue Service publishes at the beginning of each calendar year. Have your employees fill out W-4 forms specifying their filing status and the number of withholding allowances for you to use when figuring payroll income tax amounts.Find the sheet in Circular E that corresponds with your company's payroll tax period, such as weekly or monthly, and that also corresponds to the employee's filing status, such as single or married filing jointly. Find the line on that sheet that matches your employee's earnings for the tax period and go to the column that matches the number of withholding allowances specified on that employee's W-4 form. Subtract the tax amount on the matching line and column from the employee's gross pay. Depositing Federal Tax WithholdingWhen you first register with the IRS as an employer, the agency assigns you a schedule for tax deposits, such as monthly or weekly.
If your payroll reporting amounts change drastically, the IRS may change your reporting frequency. Register on the Electronic Federal Tax Payment System website to link your company bank account and make federal tax deposits. Social Security and MedicareFor Social Security withholding, multiply 0.062 (for 6.2 percent) by the gross pay amount. For Medicare withholding, multiply 0.0145 (for 1.45 percent) by gross pay. To calculate net pay, subtract these amounts from each employee's gross pay, along with other deductions such as federal income tax, state taxes and employee benefit amounts that your employees contribute toward their own plans.
Federal Employer Tax ContributionsAs an employer, you're responsible for matching employee contributions for Social Security and Medicare. These sums are due along with employee withholding amounts according to the schedule you use for EFTPS tax deposits. If you are on a monthly or quarterly tax schedule, be sure to set aside the tax deposit amounts you accrue so you don't come up short when it's time to pay.