Updated: January 12, 2024
Iowa is where dreams come true. He built it, and they came. Even 30 years later, the Field of Dreams movie site attracts more than 100,000 visitors every year who want to step on the field and have a catch. The movie might be fiction, but building your small business is not. Your small business is your dream. Whether you own a burger joint in Iowa City or a body shop in Des Moines, there’s one thing that’s definitely not part of your dream: payroll taxes.
We want you to create the business of your dreams without having to deal with payroll taxes, so we’ve designed a nifty payroll calculator that can figure out all of the federal and Iowa state payroll taxes for you and your employees. All you have to do is input wage and W-4 information for each employee into the calculator, and it will do the rest of the work for you.
Federal payroll taxes for Iowa employers
First of all, for Uncle Sam’s sake, let’s calculate federal payroll taxes. Here’s a quick rundown of the components that go into federal tax withholdings. For a more detailed explanation on all of the steps below, head on over to our 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 you don’t forget 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.
- Bonuses, commissions, and tips are all part of gross wages as well.
- Calculate any pre-tax withholdings. If your employees have 401(k) accounts, flexible spending accounts (FSA) or any other pre-tax withholdings, subtract them from gross wages prior to applying 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 further withholding information through the IRS Publication 15-T.
- 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 $168,600 in a given calendar year. Employers must match this tax.
- For Medicare tax, withhold 1.45% of each employee’s taxable wages until they have earned $200,000 in a given calendar year. Employers also must match this tax. For employees who earn more than $200,000 per year, you’ll need to withhold an Additional Medicare Tax of 0.9%, which brings 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 taxes come with a huge caveat that you will want to know about. 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. It’s an easy way to save a whopping 90%, so make sure you take advantage! Only you as the employer are responsible for paying FUTA taxes, so you don’t need to withhold FUTA from your employees’ paychecks.
- Subtract any post-tax deductions. Most of your employees won’t have any post-tax deductions, but you might need to withhold things like court-ordered wage garnishments, child support, etc. Make sure you take these into consideration as well.
Iowa (IA) state payroll taxes
Now that we’re done with federal taxes, let’s look at Iowa state income taxes. Iowa charges a progressive income tax, broken down into nine tax brackets. The rate ranges from 4.40% to 5.70%.
Iowa does not have any local city taxes, so all of your employees will pay only the state income tax.
Iowa state unemployment insurance (SUI)
As an employer in Iowa, you have to pay unemployment insurance to the state. The 2024 rates range from 0% to 7.0% on the first $38,200 in wages paid to each employee in a calendar year.
If you’re a new employer (congratulations!), you pay a flat rate of 1%. New construction employers pay 7.0%.
Cut Those Paychecks!
You’ve done it! You’ve checked it off your to-do list so you can move onto the important things. Once each employee’s net pay is calculated (after taking deductions and withholdings into consideration), you’re in the clear.
All you have to worry about is getting your employees paid on time as well as setting aside whatever you owe in FICA and unemployment taxes. Those numbers can add up quickly!
You will need to fill out Form 941 to file federal taxes on a quarterly basis, and Form 940 to report your annual FUTA liabilities. You can pay taxes online using the EFTPS payment system. All the IRS employment tax due dates can be found here.
Additional Iowa payroll tax resources:
As if that wasn’t enough, here are some helpful links that can if you would like to learn more about Iowa payroll taxes:
More helpful payroll calculators for Iowa employers
Iowa employers can use the calculator at the top of this page to quickly calculate their employees’ gross pay, net pay, and deductions in a few clicks. However, some employers may need to do a little more math before they are ready to cut paychecks. For example, do you occasionally reward your company’s top performers with bonuses? These payments are considered supplemental wages by Uncle Sam and must have taxes withheld. Also, if you have workers who leave from time to time, you may need to spend some time figuring out their last paychecks. So, if you could use a little more help navigating the numbers, check out some of the calculators listed below.