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How Do Payroll Schedules Affect Tax Withholding Calculations? November 29, 2019

Brownfield, Terry
How Do Payroll Schedules Affect Tax Withholding Calculations?, Brownfield, Texas

Apart from making sure your employees are given checks on time, employers are responsible for withholding money from their pay based on the tax laws, the answers they specified in their onboarding documents, and their payroll schedule. The guide below explores how these calculations are made.

How Do Biweekly and Monthly Payroll Taxes Compare?

Federal & State Income Taxes

payrollIncome taxes, regardless of the payroll schedule, should be calculated based on how much the employee is expected to earn during the year. Typically, the amount a company should withhold can be determined by using federal and state tax tables to determine which bracket the employee falls in. This figure may increase depending on how many withholding allowances the employee took when they filled out their tax forms.

The total amount withheld from each check should be the same no matter what the payroll schedule is. However, the amount per check will differ.

For example, if you use a bi-weekly schedule, each employee’s tax withholdings will be divided by 26—or the number of paychecks that will come in the year. But, if you use a monthly schedule, these withholdings will be divided by 12—the number of months in the year. As a result, those with monthly payroll will have a higher withholding per check.

These withholding amounts may vary from check to check if an employee is paid an hourly wage and works different hours every period. 

Social Security & Medicare

Social Security and Medicare deductions do not require the use of tax tables. Instead, the administrator will simply take a specific percentage out of the total taxable pay to cover these obligations. These percentages remain the same regardless of the pay schedule.  

How Can an Accountant Simplify Payroll Processes?

Well-versed in current tax laws, accountants can review all employee checks to ensure the right amounts are withheld. They can also prepare and submit payroll taxes, which are generally expected quarterly. This oversight will help your company avoid mistakes that could result in fines or fees from the IRS.

Your accountant can also verify that every employee is being paid accurately for their time worked.

 

When you want to take the pressure off of payroll and tax planning, turn to Donna Sellers CPA. Serving the Brownfield, TX, community for more than two decades, this experienced certified public accountant knows how to streamline payroll processes, as well as determine a schedule that makes the most sense for your business. In addition, Sellers can assist with many other financial aspects of your company—such as bookkeeping and corporate tax preparation. To learn more about these services, visit this accountant online or call (806) 637-8556.

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