©2023 OnPay, Inc.
Insurance offered through OnPay Insurance Agency, LLC (CA License #0L29422)
Updated: July 18, 2023
There’s nothing in the country like Big Sky Country. Its pull is something that out-of-staters just can’t quite understand, even if they’ve seen or heard of Yellowstone and Glacier National Parks. You know Montana inside and out. That’s why you started a small business here. But whether you own a BBQ joint in Billings or a fly shop in Helena, there is one thing that you and all the other small business owners can agree upon: you’d rather be out fishing in the dead of winter than worry about payroll taxes.
We don’t want you to worry about payroll taxes either, so we went ahead and designed a nifty payroll calculator that can figure out all of the federal and Montana 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 Montana employers
First of all, let’s give Uncle Sam his due. Here’s a quick rundown of the components that go into federal tax withholdings. For a more detailed explanation of all of the steps below, we invite you to 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.
- Subtract 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 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 Social Security and Medicare taxes:
- For Social Security tax, withhold 6.2% of each employee’s taxable wages until they have earned $160,200 in a given calendar year. As an employer, you 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. You must also 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%. You don’t need to match the Additional Medicare Tax. Only employees are responsible for paying this 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 should know about. You can claim a tax credit of up to 5.4% for the 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 if they do, you will need to withhold things like court-ordered wage garnishments, child support, etc. Make sure you take these into consideration as well.
Montana (MT) state payroll taxes for 2023
Now that we’re done with federal payroll taxes, let’s look at Montana’s state income taxes. Montana charges a progressive income tax, broken down into seven tax brackets. The 2023 tax rates range from 1% to 6.75%. Employees who make more than $18,400 will hit the highest tax bracket.
Montana doesn’t have any local taxes, so you only have to withhold for state taxes.
Montana state unemployment insurance (SUI)
As an employer in Montana, you have to pay unemployment compensation to the state. The 2023 rates range from .13% to 6.30% on the first $40,500 in wages paid to each employee in a calendar year.
If you’re a new employer (congratulations on getting started!), your tax rate ranges from 1.58% to 2.38%, depending on your industry classification.
Write Those Paychecks!
Time to dig in! You’ve checked it off your to-do list so you can focus on growing your business. Once each employee’s net pay is calculated (after taking deductions and withholdings into consideration), you’re good to go.
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.
Do you have employees nearby too? These might be helpful.
Additional Montana payroll tax resources:
If you would like to learn more, here are some helpful links that we think can be useful:
Montana Department of Labor and Industry (406) 444-2840 | Unemployment Insurance Division
Montana Department of Revenue | Contact Information | Wage Withholding | Business Tax Express
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.
More payroll calculators for Montana employers
Employers in Montana 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. But sometimes a company has to do a little more math before they can cut paychecks. For example, do you own a business where employees earn tips from customers? Keep in mind that you are responsible for withholding taxes from your employees’ paychecks based on the tips they receive. Additionally, if an employee leaves for another employer, you’ll need to calculate their final pay. So, if you need a little more help with the number-crunching, check out some of the calculators below.