Key Elements of Payroll Sterling CO

• Income tax: The Federal government, most states, and some local governments require employers to withhold income tax from their employees' pay.


• Social Security and Medicare: Sometimes referred to as FICA (Federal Insurance Contributions Act). Employers are required to withhold and deposit these taxes from employees' paychecks, and also make matching contributions.


• Unemployment tax: Employers pay Federal Unemployment Tax (FUTA) to the unemployment insurance system. The amount owed is based on the business' total employee wages. Many states also have their own unemployment taxes.

Employers are required to deposit income tax and FICA withholdings to an authorized financial institution or Federal Reserve Bank. Most businesses are required to make monthly deposits, although some contribute on a semi-weekly basis. Your contributions are deposited through electronic deposits or through Federal Tax Deposit (FTD) coupons. Check with the IRS to determine which payment schedule and deposit method is required of your business.

Cafeteria plans, also called "flexible benefit" plans, allow employees to set aside pre-tax dollars to pay for certain benefits such as medical and dependent care assistance. These plans can be beneficial for both employers and employees: employers who carry such plans will pay less FICA and FUTA taxes, and employees will pay less FICA taxes because their amount of taxable income is reduced. Additional benefits that may be offered as part of a cafeteria plan include group life insurance and disability insurance.

Depending on the benefits you offer employees, your company may also need to track the following items as part of payroll management:

• Insurance and other benefits: Health coverage, dental insurance, life insurance and other benefits to which employees may contribute.


• Profit-sharing plans: Stock option or equity plans offered to employees.


• 401(k) programs: Pre-tax dollars set aside by employees and employers for retirement purposes.


• Education benefits: Company-sponsored training and/or degree advancement.