Updated January 7, 2021
The Sooners, Route 66, Twister, and the birthplace of the parking meter are part of Oklahoma lore. Ok, maybe not the parking meter part. When we walk back to our car and see tickets under the windshield wiper, we question our own existence and wish that darn thing was never invented. As a small business owner, your version of the parking meter is payroll taxes. Whether you own a tasty sandwich shop in OKC or a trendy cafe in Tulsa, payroll taxes are unavoidable. Do it right, and no one bothers you. Do it wrong, you’ll get plenty of tickers under your small business’s windshield wiper.
Luckily, that’s what we’re here for. We help you do payroll taxes right so that you can focus on growing your business. We designed a handy payroll tax calculator with you in mind. Just enter income and W-4 information for each employee, and the calculator will take care of the rest.
See Oklahoma tax rates
Federal Payroll Taxes
First things first, we have to pay the federal government. Whether your employees are hourly or on salary, all federal taxes remain the same. We’ll go over the general breakdown here, but if you want more details, hop on over to our step-by-step guide.
- First, calculate gross wages. If your employee is being paid hourly, simply multiply the number of hours worked during the pay period by the hourly rate. For salaried employees, take their annual salary and divide it by the number of pay periods. Don’t forget about bonuses, commissions, and tips. They all go into gross wages.
- Then, deduct pre-tax withholdings. Some of your employees might choose to participate in 401(k), HSA, FSA, or other eligible benefits. They are subtracted from gross wages before income taxes are taken out.
- Deduct out Federal income taxes. The big enchilada. It’s the largest tax that your employees will pay. The tax rates vary based on income and can range from 0% all the way up to 37%. Click here to read all you need to know about deducting the right amount of federal income taxes.
- Deduct FICA taxes. FICA stands for Federal Insurance Contributions Act, and it was first introduced all the way back in 1935. There are 2 FICA taxes. The first is Social Security tax, which is 6.2% of the first $142,800 of taxable wages per year. Any wages above $137,700 is not taxed. As the employer, you also have to pay this tax. You have to match your employees’ contributions dollar-for-dollar. The second is Medicare tax, which is 1.45% of the first $200,000 of taxable wages per year. After that, the rate jumps up to 2.35%. The 0.9% bump is called the Additional Medicare Tax (obviously). As the employer, you must match the first 1.45% of your employees’ contributions, but you’re exempt from the Additional Medicare Tax.
- Pay FUTA taxes. Your employees get to sit this one out. Only employers are responsible for paying federal unemployment taxes, which are 6% of the first $7,000 of each employee’s taxable income for the year. However, there’s one huge caveat that can reduce your FUTA tax liabilities by a whopping 90%. If you pay your taxes in full and on time each quarter, you are eligible for a tax credit of up to 5.4%. But it all depends on which state you do your business in. You can refer to this IRS guidance for more details.
- Finally, deduct post-tax withholdings. After you’ve deducted all the proper taxes, there’s just one more thing you have to look out for. Some of your employees may be levied wage garnishments or child support, so watch out for a letter from the court that may show up at your office.
Oklahoma State Payroll Taxes
With six marginal tax brackets based upon taxable income, payroll taxes in Oklahoma are progressive. Tax rates range from 0.5% to 5.0%. Single filers will pay the top rate after earning $7,200 in taxable income per year.
The good news is that only the state charges income tax, so there’s no need to worry about local taxes.
Oklahoma State Unemployment Insurance (SUI)
Oklahoma has a State Unemployment Insurance (SUI), which ranges from 0.3% to 7.5%. The wage base for SUI is $24,000 of each employee’s taxable income.
If you’re a new employer (congratulations, by the way!), your rate will be 1.5%.
Write Those Paychecks!
Touchdown! Now that you’ve figured out payroll taxes and withholdings, it’s time to cut those checks.
Just make sure you keep your portion of the FICA and FUTA payments in mind. Those taxes can add up come tax season if you don’t remit them regularly. And you definitely want that FUTA tax credit, don’t you?
All federal tax filings are due quarterly. Employers must complete the IRS Form 941 along with paying the payroll taxes. FUTA unemployment taxes must also be paid quarterly, but you only have the fill out the IRS Form 940 at the end of the year. Or, if you’d rather pay on an ongoing basis, you can use the EFTPS payment system.
All the employment tax filing due dates can be found here.
Additional Oklahoma Payroll Tax Resources:
Here are a few additional resources that we think will help you. Take a look now and thank us later.
Oklahoma Tax Commission (405) 521-3160 | New Business Information | Business Tax Forms
Oklahoma Employment Security Commission (405) 557-7222 | Business Resources | Filing Employer Taxes Online