If it’s time to pay your employees, you’re in the right place! Our free payroll tax calculators make it simple to figure out withholdings and deductions in any state — for any type of payment. Employers can use it to calculate net pay and figure out how much to withhold, so you can be confident about your employees’ paychecks.
We also have special calculators for bonuses, final payments, or any other situation that might arise for employers. Try out our payroll calculators above or read on for a great payroll overview.
We’ll go over the basics employers need to know below, but you can also use our payroll processing guide to find definitions, tax forms, and detailed instructions for calculating payroll on your own.
Calculate taxes you’ll need to withhold and additional taxes you’ll owe
Pay your employees by subtracting taxes (and any other deductions) from employees’ earned income
Remit taxes to state and federal authorities
File quarterly and year-end payroll tax forms
Give your employees and contractors W-2 and 1099 forms so they can do their taxes
The calculator above can help you with steps three and four, but it’s also a good idea to either double-check the calculator by using the payroll tax rates below, or save time and effort by using a reliable payroll service.
Federal Payroll Tax Rates
The steps our calculator uses to figure out each employee’s paycheck are pretty simple, but there are a lot of them. Here’s how it works, and what tax rates you’ll need to apply.
Figure out each employee’s gross wages. Gross wages are the total amount of money your employee earned during the current pay period. The math works a little differently for salaried employees, hourly employees and contractors.
Hourly employees: You’ll need to multiply the number of hours your employee worked by their hourly pay rate. If they worked any overtime hours, make sure to calculate those hours at the overtime rate.
Salaried employees: A salaried employee is only paid a fraction of their annual salary each paycheck, so divide that employee’s annual salary by the number of pay periods you’ll have each year.
Contractors: Advance to “Go” and collect $200! You actually don’t have to withhold any payroll taxes for contractors. Just pay them whatever’s on their invoice, but remember that you’ll need to send each contractor a 1099 form at the end of the year. Keeping good payroll records will make that process a lot easier.
Deduct any pre-tax withholdings. Payroll taxes aren’t the only thing to exclude from employees’ paychecks. Make sure to deduct for things like health and retirement benefits. The process for documenting and remitting these funds will vary depending on your benefits providers. Note that many services can be integrated with payroll software, which allows you to automate your deductions.
Deduct and match any FICA taxes: FICA, the Federal Insurance Contributions Act, is one of the many payroll acronyms you’ll soon get to know and love. It simply refers to the Medicare and Social Security taxes employees and employers have to pay:
Social Security tax: Withhold 6.2% of each employee’s taxable wages until they earn gross pay of $142,800 in a given calendar year. The maximum an employee will pay in 2021 is $8,853.60. As the employer, you must also match your employees’ contributions.
Medicare tax: Under FICA, you also need to withhold 1.45% of each employee’s taxable wages for Medicare. Employers must match this tax as well. There’s no withholding limit like the one for Social Security, but well-compensated employees who earn more than $200,000 must pay an Additional Medicare Tax of 0.9%. You don’t have to match the 0.9%, but you should include it in your withholding calculations.
Pay FUTA unemployment taxes: Employers are solely responsible for paying federal unemployment taxes. The tax rate is 6% of the first $7,000 of taxable income an employee earns annually. If your company is required to pay into a state unemployment fund, you may be eligible for a tax credit.
Deduct federal income taxes, which can range from 0% to 37%. Withholding information can be found through the IRS Publication 15-T.
Subtract any post-tax deductions: 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.
By now, you should know everything you need to know about payroll and payroll taxes. We recommend diving into our free calculators (which even let you print out pay stubs). Or if you’d like to make life a little easier on yourself, check out our award-winning payroll software.
For employees who do payroll themselves, we help you save over 15 hours a month by calculating your paychecks, filing all your payroll taxes (including W-2s and 1099s), handling the direct deposit payments, and a whole lot more.
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