With all things grand, there’s always someone small pulling the strings. There’s the ticket collector at the Indy 500, the snow shoveler who clears the roads for the neighborhood, the mail collector in the town of Santa Claus, and the dishwasher at the local burger joint. Though these roles seem small, they have a big impact just like your small business has a big impact on Indianapolis, Lafayette or another corner of Indiana. Similarly, the small feat of payroll taxes can have a big impact, good or bad, on your business. So let us help you.
We’ve designed a handy payroll calculator to help you calculate federal and Indiana payroll taxes. Just enter wage and W-4 information for each employee, and the calculator will do the rest, effortlessly letting you check off one of the least glamorous to-dos on your list.
Federal Payroll Taxes
First of all, let’s take care of Uncle Sam. Let’s use the calculator to see all your employees’ federal withholdings, as well as any additional taxes your business is responsible for paying. Here’s a quick overview of all you need to know about federal income taxes. For a more detailed explanation on all of the steps below, we invite you to head on over to our more comprehensive step-by-step guide.
- Gross wages, which is simply the amount of money an employee has earned during the last pay period.
- For hourly employees, multiply the number of hours worked by their pay rate — and make sure to take overtime into consideration.
- For salaried employees, divide each employee’s annual salary by the number of pay periods you have over the course of a year.
- Don’t forget to add any commissions, tips, or bonuses. They all count toward gross wages.
- Calculate any pre-tax withholdings. If your employees have 401(k) accounts, Flexible Spending Accounts (FSA), Health Savings Accounts (HSA), or any other pre-tax withholdings, subtract them from gross wages because they are exempt from payroll taxes.
- Deduct federal income taxes, which can range from 0% to 37%. We won’t get into the nitty-gritty details here, but you can find all the information you need by checking out the IRS Publication 15-A.
- Deduct and match any FICA taxes to cover Medicare and Social Security taxes:
- For Social Security tax, withhold 6.2% of each employee’s taxable wages until they have earned $132,900 in the 2019 tax year. As an employer, you must match this tax dollar-for-dollar.
- For Medicare tax, withhold 1.45% of each employee’s taxable wages until they have earned $200,000 in the 2019 tax year. You must also match this tax. For employees who more than $200,000 per year, you need to withhold what’s appropriately called the Additional Medicare Tax (super original, right?). The additional rate is 0.9%, bringing the total employee Medicare withholding above $200,000 to 2.35%. Employers are not responsible for paying the Additional Medicare Tax.
- Pay FUTA unemployment taxes, which is 6% of the first $7,000 of each employee’s taxable income. FUTA comes with one big caveat. You can claim a tax credit of up to 5.4% for state unemployment tax you pay, as long as you pay in full and on time. Only employers are responsible for paying unemployment taxes, so you don’t need to withhold FUTA taxes from your employees’ paychecks.
- Subtract any post-tax deductions. Most of your employees won’t have any post-tax deductions, but you might be asked to withhold court-ordered wage garnishments, child support, etc.
Indiana State Payroll Taxes
Now that we’re done with federal taxes, let’s talk about Indiana state taxes, shall we?
Indiana state income taxes are pretty straightforward. It’s a flat tax rate of 3.23% that every employee pays. But on top of state income taxes, each county charges its own income tax. The State of Indiana website posted a complete list of 2019 tax rates. You can check it out here.
Let us handle payroll for you
OnPay processes payroll and automates all your tax payments and filings.
Indiana State Unemployment Insurance
As an employer in Indiana, you will have to pay the state unemployment insurance (SUI), which ranges from 0.5% to 7.4% on a wage base of $9,500 per employee. New employers pay a flat rate of 2.5%.
Cut Those Paychecks!
You’re almost at the finish line! Once you’ve calculated each employee’s net pay, you’ll be ready to spread the wealth. Just don’t forget to set aside the FICA, FUTA, and SUI contributions your business is responsible for paying, or else you will have a big tax surprise when year-end rolls around.
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 Indiana Payroll Tax Resources:
If all that wasn’t enough, and you want to learn more about Indiana payroll taxes, here are a couple of websites we suggest you check out:
Indiana Department of Revenue | Withholding Tax Forms | Withholding Taxes | Unemployment | Employer Self Service
InTax | Manage Taxes Online