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  • Withholding Tax – How it Works?

    A withholding tax is also sometimes called a retention tax. It is the purpose of income being withheld so that specific amounts or percentages basedRead More

    Learn More
  • Unique Aspects of Texas Payroll Law and Practice

    There is no personal state income tax in Texas, unlike many other states in the USA. which means employers don’t have to withhold state incomeRead More

    Learn More

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Withholding Tax – How it Works?

Withholding Tax

A withholding tax is also sometimes called a retention tax. It is the purpose of income being withheld so that specific amounts or percentages based on the employee’s salary can be paid to the government. These government taxes include such things as payment of federal tax, state taxes if applicable, Medicare taxes, social security and any court orders or other taxes which are owed.

It is the responsibility of an employer to withhold these taxes each time the employee is paid then when they file their tax return they submit the taxes to the relevant authorities. It’s a government requirement and everyone has to do it.

The withholding of tax is treated as a payment on account, it’s the recipients tax liability. If you overpay it can be refunded, but not immediately, as this has to be filed and requested. The amount of tax withheld on employee income payments works in percentages which are based on gross earnings.

For example, an employer must withhold 6.2% for social security if the employee earns $118,500 or less, any amount above this is not subject to the review here!

The employer must also take 1.45% in of the employee’s gross salary to pay for Medicare which means if you earn $75,000 per year the employer withholds $1,087.50 per annum to pay for it. This, along with the other withheld taxes, are then submitted to the IRS, along with state taxes, federal taxes which are also based on salaried gross income.

Some government bodies have laws which require the taxes to be paid before any monies can be used for other purposes, ensuring it is paid on time. This can be difficult for any employer, especially if their payroll processing is not organized as well as it could be. A payroll services company can assist with this, as you only have to pay a fixed fee or fee per employee and everything is filed and taken care of for you.

Withholding tax is essentially income tax and other taxes which are withheld from the employee’s wages and paid directly to the government by the employer on behalf of the employee. The amount is then held as credit against taxes the employee pays during the year.

It is held from the pay of most employees unless they are on a low wage. It depends on many things including:continue reading this

• The amount you earn
• The information the employee gives to the employer
• Whether they have to withhold the single or married rate as there are allowances
• How many withholding allowances you are allowed to claim
• Whether the employee requests an additional amount to be withheld

Withholding Tax

If the employees incur any changes throughout the year they should inform their employer immediately so that any withholdings can be adjusted. This includes, getting married or divorced, if you have more than one job, if you have dividends or self-employment income and if the number of withholding allowances they can claim has changed. The employer should keep abreast of their employee’s situation to ensure nobody is withholding or overpaying more than they need to.

Unique Aspects of Texas Payroll Law and Practice

Payroll Law

There is no personal state income tax in Texas, unlike many other states in the USA. which means employers don’t have to withhold state income taxes from their employees. Apart from any taxes and student loans, only the IRS can take money from your salary each month without your permission.

The state of Texas is also unique in the fact it allows direct deposit as mandatory and the employee can choose any financial institution which accepts direct deposits as their bank of choice, where their salary can be paid each month. Each employer in Texas should pay their employees either monthly or twice per month to ensure that wages are received. When an employer hires a new employee they must report the following information to the state:

• Employees name
• Employees address
• Social Security number
• Employers name and address
Federal Employer Identification Number (EIN)
• The following details can also be reported but are not mandatory:
• Employees date of birth
• Date of hiring
• Payroll address if a child support notice is in effect

All of the information should be reported within 20 days of a new employee being hired. Texas also has a unique way of reporting child support deductions which would otherwise be classed as court ordered deductions. If an employer has received a notice to withhold child support they must do the following:

Withhold funds immediately after the receipt of the order

Send the payment within 7 days of the employee’s scheduled payday, the same applies to termination notice.

There is an administration fee every month.

Each state has differing requirements for maintaining wage and salary records, these usually are two to three years depending on the type. The state of Texas also requires reporting earnings and contributions for any unemployment insurance purposes especially if the employer has over 250 employees.

If any wages are unclaimed, Texas law states that they are to be handed over after a 1.5 years if it is less than a specific amount. The employer is also required to keep details and records of monies abandoned by an employee. These funds must be turned over to the state for ten years.view more details from

Payroll Law

Navigating specific payroll and tax laws in any state is difficult, especially when each are different. How do you know where to begin? If you are setting up a business in the state of Texas and will be employing staff you need some assistance so that you are aware of the state rules with regards reporting payroll. Companies like Austin Texas Payroll Services can help with the payroll processing of a new organization.visit site here!

They know Texas payroll law inside out and can keep you ahead of the game before you even start. By asking for advice prior to your business opening you can save yourself a lot of problems with the state later on, especially if you forget to lodge paperwork which is mandatory. It also leaves you to proceed with hiring and growing your business.

Outsourcing Your Payroll Services As a Small Business Owner

Payroll Services

There are a lot of things to consider if you are deciding on whether to your keep in-house payroll system or outsource payroll processing services. You may wish to keep control of your payroll services and have the flexibility to make changes as and when required. However, if you travel a lot and aren’t in the office to oversee things, it may be difficult for you to keep on top of any issues which arise.

When you outsource your payroll there are adjustments to make, but the good certainly outweighs the bad. Everything is completed for you, leaving you to grow your business without the concern that your employees are being paid on time. There is also an added bonus when you outsource your payroll services, you don’t have to spend time interviewing or hiring new members of staff or training existing members on new system software. Payroll rates can be competitive and company professionals are all up to date with current legislations meaning you don’t have to worry about completing a form incorrectly or missing out a new document which you weren’t even aware website here!

If your current payroll system is struggling to meet demand, then an outsourced payroll service may be the answer. Ensuring your employees are reimbursed for their services on time is worth paying for. After all, a happy workforce means your business continues to run smoothly, employees are happy and you can continue to run the business without aggravation.

Outsourcing your payroll means that they take care of any tax withholding, employee direct deposits and wage slips. Also, if you have staff who are all on different rates of pay and alternate payment schedules they can take care of this too.go to website from

Another consideration is if you have the technical capabilities to support an in house payroll, if not outsourcing is key for your company’s growth. Think about the cost of having to upgrade in house, paying for server compatibility, training on software for employees and ensuring they are all up to date with government payroll legislations. If this is starting to sound overwhelming speak with an outsourcing company with a good reputation in your area, they are there to help you and find a quick, easy and cost-effective solution to all of your problems. They also have tailor-made services to suit your budget.

Payroll Services

Just consider the size of your organization, if you are planning to grow and expand and put your plans for payroll into place now. Research all of your options, choose a reputable company, look them up online – do they have a social media presence? What are customers saying about their services? Is their website professional? Are they local to you or remotely based? Find the answers to all of these questions and you will find the solution to assist your business, and your payroll headaches will all finally be resolved.

Are You Overpaying Your Withholding Taxes?

Outsourcing Payroll

Overpayment of your withholding taxes happens more often than you think. But what happens if you calculate them wrong and you pay too much, how do you gain a refund? When you pay your employees their weekly, bi-weekly or monthly salary you as the employer have to withhold taxes on their behalf. These taxes include, any state or local taxes, Medicare, federal and social security, plus any court ordered taxes or additional including charitable donations or union payments.

What happened when I overpay?

Overpayment happens, it’s a fact of life. It can occur when you have a computer glitch, someone in your payroll department has calculated incorrectly, payroll software may not have input the details correctly. Unfortunately for the employer if you overpay on your withholding taxes, it doesn’t mean you are going to get it back straight away. The Internal Revenue Service doesn’t process instant refunds. You need to report and file the discrepancy, on the 941 report. Basically tick the box and apply for your refund on the next return, and you need to keep a record of this so on your next tax return you can detail your overpayment.

It can be a complete pain when you overpay, especially if the error wasn’t down to you. A payroll services company can help alleviate this headache by keeping an eye on things for you and ensuring you don’t overpay on your withholding taxes. You can leave it in their capable hands and know that your payroll rate to them is well spent. If you have made an overpayment it’s important that you keep track on them on any payroll software so you can calculate your overpayment into your next return. After all, you don’t want to overpay every single time you file your taxes.see details from

How can I change things?

Overpayments accrue the same interest payments at the same rate that the IRS would charge for any tax underpayments, the interest rate is set in the first month of each quarter plus three percentage points. This is slightly different for corporate overpayments it will increase by two percentage points not three. There are no penalties to pay on withholding tax overpayments.

If the overpayments are becoming a regular occurrence within your organization it may be time to look at a payroll services company, after all if the overpayment is sitting in the IRS’s account it isn’t helping your business. The payroll rate you would pay to ensure that this doesn’t occur each time you file a tax return, doesn’t only save you money in the long term – it also keeps your business moving forward.

Outsourcing Payroll

Qualified professionals like Austin Texas payroll services ensure you only pay the withholding taxes you are supposed to and nothing more. This alleviates issues like having to take it into account on your next return, filling in forms, calls to the IRS refund line and a multitude of other headaches you could do without. Look into using a payroll service then your tax issues could become a thing of the distant past.