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Insurance offered through OnPay Insurance Agency, LLC (CA License #0L29422)
Updated: January 10, 2023
As the capital of the United States, Washington D.C. is known worldwide as a vibrant city full of historical monuments and buildings, as well as iconic museums and performing arts venues. From its position as the seat of the US government, to the startups, the nonprofits, and all the local businesses, it’s a great place to set up shop.
However, running payroll can be a hassle — no matter where you do it. That’s why we created a simple Washington D.C. payroll calculator that will do all the work for you. Just input your employees’ W-4 and wage information, and our calculator will process each employee’s gross pay, deductions, and net pay after D.C.’s state and federal payroll taxes.
See District of Columbia tax rates
Before we get into the District of Columbia’s payroll taxes, let’s make sure you have all the relevant information you need to get those federal taxes paid.
To start, add commissions, bonuses, and tips to calculate your employees’ gross wages, regardless of how they are paid — hourly or salary.
Then, deduct any pre-tax withholdings from their gross pay, such as 401(k)s, HSA contributions, or Flexible Spending Accounts that allow your employees to reduce their taxable income.
Federal Income Tax can range between zero and 37%, depending on how much net income an employee receives. You can find more detailed information about federal withholdings through the IRS.
FICA taxes are made up of two components — Social Security Tax and Medicare Tax. Social Security Tax is equal to 6.2% of your employee’s taxable wages up to an annual total of $160,200. Medicare Tax is 1.45% of each employee’s taxable wages until they reach $200,000. As an employer, you are responsible for matching the same amount each employee pays in Social Security and Medicare Taxes.
Although Social Security Taxes are not applied to any amount higher than $160,200 for each employee, the same is not true for Medicare Tax. After the $200,000 threshold is met for Medicare Tax, your employees are responsible for an additional 0.9% on top of the 1.45% they already owe. Therefore, gross wages above $200,000 are taxed 2.35% with no wage limits for the employee, but as the employer, you are only responsible for matching the original 1.45% on any wages above $200,000.
While you may get the upper hand in Medicare Taxes, that doesn’t quite apply to FUTA taxes (Federal Unemployment Taxes), which you are responsible for as an employer, but not as an employee. In other words, these taxes won’t be withheld from your employees’ paychecks. You, on the other hand, are responsible for paying 6% of the first $7,000 of each employee’s taxable income to FUTA taxes.
However, if you’re paying your FUTA taxes in full and on time, you could be eligible for a tax credit of up to 5.4%. Watch this informative video from the IRS to learn more about how you can earn up to 90% of these taxes back.
Last but not least, make sure to deduct any of your employee’s post-tax withholdings. It’s likely that these won’t be applicable to most of your employees, but could include things like court-ordered wage garnishments or child support.
Now, let’s take a deeper dive into some D.C.-specific taxes.
Washington D.C. has 6 marginal tax brackets, with rates ranging between 4% and 9.75%. You can find out where you fit in through D.C.’s Office of Tax and Revenue.
Even though D.C. isn’t technically a state, unfortunately, you’re still responsible for paying State Unemployment Insurance (SUI).
The unemployment wage base for the District of Columbia is $9,000 for 2023. State Unemployment Insurance ranges from 1.9% to 7.4% and is 2.7% for a new employer. Their employer handbook may be helpful too.
Now that you have state and federal taxes accounted for, you’re ready to spread the wealth and write those checks.
Make sure you take into consideration your portion of FICA and FUTA taxes, especially if you want to qualify for a FUTA tax credit. These federal tax filings are due each quarter.
In addition to paying payroll taxes, as an employer, you must submit the IRS Form 941 each quarter. However, while FUTA taxes are due every quarter, you only need to fill out the IRS Form 940 once at the end of the year. You also have the option of paying on an ongoing basis through the EFTPS payment system.
Here’s some more detailed information about tax filing due dates for your reference.
Here are a few more resources we think you’ll find helpful:
Department of Employment Services | New Business Registration | Employer Self Service Portal | Tax Rate Questions
Office of Tax and Revenue | File and Pay Taxes Online
These rates are based on local legislation and can change at any time. Always consult a tax professional if you are unsure about your obligations.
Try OnPay out yourself to see how easy payroll and HR can be. To get started, just share a few basic details about your business. Our team of pros will set everything up and import your employees’ information for you.