Free Online Payroll Calculator

Calculating payroll taxes is tricky because business owners need to account for federal, state, and local taxes when preparing employee paychecks. Due to the fact that these tax codes are always changing and updating, payroll unfortunately isn’t a “set it and forget it” task. By using some of the calculators on this page, you will be able to get a better understanding as to what you should be doing when you run payroll.

First, let’s get the lay of the land, and understand everything that goes into calculating payroll, whether you’re a sole proprietor and are paying yourself, or if you need to run payroll for numerous employees.

• Federal taxes: Federal taxes are the taxes withheld from your paycheck that benefit the federal government. Most commonly these taxes include government programs such as Medicare / Medicaid and Social Security. Other taxes you will likely see included are income tax, gift tax, estate tax, and employment taxes.
• State taxes: In addition to federal income tax, most U.S. states collect a state income tax from employees. You will want to be sure of the state income tax rules in your state because some states have flat tax rates, some have graduated tax rates, and seven states have no income tax at all.
• Local taxes: Local taxes will be decided by a state, county or municipality. These taxes are used to fund various civic services with garbage collection or sewer maintenance as examples. These taxes can vary drastically based on jurisdiction.

In the event you get questions from employees or simply need to estimate the impact of federal taxes on the take home pay for a certain position, having more understanding of how much money in the form of federal taxes will be taken out of an employee’s paycheck can be useful. The withholding allowance choice on Form W4 is what will determine how much money will be taken out in taxes. Some people choose to have more taxes withheld so they will receive a tax refund instead of owing on taxes, while others may choose to have more money upfront and aren’t as concerned about a refund or owing money. Another helpful calculator used to determine this is the IRS withholding calculator.

While these calculators can useful for calculating payroll on your own, there are some other things those who want to take the DIY route to doing their payroll. At first when you think of paying your employees, you are likely focusing on entering their hours or salaried rate and then paying them and calling it a day. Unfortunately, payroll isn’t that simple. In addition to hours and pay rates, you need to calculate and file FICA, state and local taxes (if applicable) for you and your employees. Additionally, if your employees work and live in different states, you’ll need to be aware of state reciprocity rules, because you could have extra taxes that you need to pay.

While this is a short list, it is a time consuming one because tax laws are known to change frequently. If you aren’t staying up to date on tax codes and rates and file payroll incorrectly, you could find yourself paying employees back for missed wages, and worst case, getting audited and having to pay tax penalties.