Any business owner that has employees within the company will be responsible for calculating withholding taxes on each paycheck. Every employer prepares employee paychecks, which involves various steps. The actual withholding taxes from the paycheck must be calculated from the income the employee receives based on various factors. In order to improve accuracy of the process, employers are able to use a payroll tax table that serves the purpose of helping employers to calculate withholding taxes appropriately and accurately.
A payroll tax table is a chart that features various columns, helping to compute the appropriate taxes to be withheld from the employee's paycheck. The withholding taxes are influenced by several factors such as the income amount, whether the employee is single or married, and the schedule by which the employee is paid whether bi-weekly or monthly. Following the income received by the employee as wages earned, the employer will then use the chart to compute the appropriate withholding taxes that should be deducted based on the employee. Every employee is different, makes a different amount, and therefore has different withholding taxes deducted from pay.
Employers will receive the tax table upon receipt of an EIN demonstrating there are others employed by the employer. The tax table is an essential tool for these employers to use in determining the appropriate withholding taxes, without which it can be difficult to accurately determine taxes to hold from the employees pay. Determining the appropriate amount is essential as the employer is responsible to pay these taxes during the year, and each employee's tax return depends highly on the accuracy of the computed withholding taxes.
As employees are working for wages, they are bound by federal, social security, Medicaid, and Medicare taxes, as well as state taxes. Employees do not determine these taxes to be determined, nor does the IRS, as this is the responsibility of the employer. The employer should be deducting the appropriate taxes from employee payroll to ensure that the proper amount is paid to the IRS throughout the year.
Tax tables are free from the IRS and will provide a complete chart of various columns that help determine the appropriate equation to apply in determining the payroll taxes that should be withheld. If these computations are incorrect, there can be cost liability to the employer in terms of tax payments to be made based on wages paid to employees, as well as complications during tax return filing of employees.