Payroll taxes are an essential part of running your own small business just like crinkled leaves of fire are essential to a Connecticut fall, nutmeg for a kitchen in the suburbs, and boats for long days sailing along the coast. But while The Land of Steady Habits has ideal essentials, payroll taxes are far from ideal.
Luckily, we’re here to help. Just call us the Long Island Sound of payroll taxes, the people who will shine the light to guide you all the way home to write those paychecks. All you need to do to access that light is enter wage and W-4 information for each employee and our payroll tax calculator will calculate all the Connecticut and Federal payroll taxes for you.
Federal Payroll Taxes
First and foremost, let’s pay Uncle Sam. Our handy payroll calculator can help you figure out the federal payroll tax withholding for both your employees and your business.
Below is a quick 6-step overview of everything that goes into calculating the payroll tax for your employees. If you prefer to see a more detailed calculation, we created a step-by-step guide just for you.
- Figure out the employee’s gross wages. Gross wages represent the amount of money an employee has earned during the most recent pay period.
- Hourly employees: Multiply the number of hours worked in the most recent pay period by their pay rate. Make sure to calculate any overtime hours worked at the appropriate rate.
- Salaried employees: Divide each employee’s annual salary by the number of pay periods you have each year.
- Don’t forget to add bonuses, commissions, and tips in here as well.
- Deduct any pre-tax withholdings. Do your employees have 401(k) accounts, flexible spending accounts (FSA), or other pre-tax deductions? If so, deduct their contributions to these accounts from their gross wages before you start applying federal payroll taxes.
- Deduct federal income taxes, which can range from 0% to 37%. We won’t get into the nitty-gritty here, but you can find all the withholding information through this IRS publication.
- Deduct and match any FICA taxes to cover Medicare and Social Security taxes:
- Medicare tax: Withhold 1.45% of each employee’s taxable wages until they have earned $200,000 in a given calendar year. You as the employer will need to match this tax. For employees who earn more than $200,000 in taxable wages, you need to withhold what’s called an Additional Medicare Tax (super original, we know). The rate is 0.9%. Only the employee is responsible for paying the Additional Medicare Tax.
- Social Security tax: You need to withhold 6.2% of each employee’s taxable wages until they have earned $137,700 in the 2020 calendar year. The maximum amount of Social Security tax that employees must pay would, therefore, be $8,537.40. As the employer, you also must match this tax.
- Pay FUTA unemployment taxes: You as the employer are responsible for paying 6% of the first $7,000 of taxable income an employee earns annually, for a maximum tax of $420 per employee. However, you can claim a tax credit of up to 5.4% for paying your Connecticut state unemployment taxes in full and on time each quarter, which means that when everything’s said and done, you’ll only have to pay 0.6% FUTA tax. Your employees are not responsible for paying FUTA taxes.
- Subtract any post-tax deductions: Most of your employees will be done at this point, but some employees may be responsible for court-ordered wage garnishments or child support. They may also choose to make post-tax contributions to savings accounts, elective benefits (like life insurance), or other withholdings.
Connecticut State Payroll Taxes
Now that we’re done with federal income taxes, let’s tackle Connecticut state taxes. The State of Connecticut is on the high end of marginal income tax rates compared to the rest of the country. It’s a progressive income tax that ranges from 3% to 6.99%.
Connecticut does not have any local city taxes, so all of your employees will pay only the state income tax.
Connecticut State Unemployment Insurance (SUI)
As an employer, you’re responsible for paying SUI (remember, if you pay your state SUI in full and on time, you get a 90% tax credit on FUTA).
SUI tax rates range from 1.9% to 6.8%. New employers pay 3.2% in 2020. The taxable wage base is $15,000 for each employee.
Write Those Paychecks!
Give yourself a high-five because you are now done! Once you’ve calculated your employees’ net pay by taking out the appropriate withholdings, you’re ready to cut their checks.
In addition to making sure your employees get paid on time, don’t forget to set aside the employer taxes your company is responsible for. Those FICA and FUTA and SUI payments can add up if you don’t remit them on a regular basis.
Use Form 941 to file federal taxes quarterly. Use Form 940 to report your annual FUTA tax. You can pay taxes online using the EFTPS payment system. You can find more details about employment tax due dates here.
Additional CT Payroll Tax resources:
If all that wasn’t enough, and you want to learn more about Connecticut payroll taxes, here are a few websites we suggest you check out:
Department of Revenue Services: (860) 297-5962 | Withholding Information | Small Business Assistance | New Employer Information
Department of Labor: (800) 263-6000 | File Your Taxes Online | How To Register