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Joe Diamond, CPA, CFP®, EA, MST
Diamond Financial Corporation
4256 North Arlington Heights Road, Suite 204
Arlington Heights, IL 60004
Phone: 847-884-8500
Email: customerservice@diamondfinancial.com
Website: www.diamondfinancial.com
January/February 2021
Payroll Taxes
Sole proprietors who decide to add employees need to understand payroll taxes.
Federal Taxes
Both you and your employee must pay 6.2% for Social Security and 1.45% for Medicare tax. As an employer, you’ll pay the federal unemployment tax which is 6% on the first $7,000 of each employee’s earnings. For high earning employees, you must withhold the Additional Medicare tax which is 0.9% of wages in excess of $200,000 in a year. Also, effective January, 2021, the Social Security tax will be collected on wages up to $142,800, up from $137,700.Based upon your employee’s Form W-4 inputs, you’ll need to withhold federal income tax from their wages. The amount to withhold depends on things like tax filing status, number of dependents and whether the employee has multiple jobs.
State Taxes
If your employees complete work in a state with state income tax, you’ll need to withhold this tax from their wages. Most states require the employer to pay a state unemployment tax. Keep in mind some states also require employees to pay the state unemployment tax so this may need to be withheld from your employee’s paycheck.Lastly, some cities, towns, and other local governments impose a payroll tax.
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Advisory Services offered through Diamond Financial Corporation, Registered Investment Advisor. Custodial Services provided by TD Ameritrade. Member FINRA/SIPC/MSRB.
Tax Preparation provided by Diamond Financial Corporation.
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