Income tax is administered by the state revenue agency or otherwise by tax assessors established locally. So before you start calculating your taxes, you must consider going through policies applicable and the type of tax deductable from your employee’s income.
Once you have subtracted total allowances from total gross salary, now you have to determine how much income tax needs to be deducted or withhold. Jake from Hillhurst Tax Group says “for that you must review the IRS table, pay period and employee filing status, this will allow you to know which tax bracket your employee falls in and exactly how much needs to be deducted.”
You must remember that these policies are there to ensure that your employee contributes to the state or federal revenue as much he is required to and not more, therefore the government has provided clear guidelines on who is eligible to pay how much? It is your responsibility to ensure that your employees are not exploited by paying extra taxes because of negligence. Similarly you must also make sure that they do not pool in for your taxes, you must not transfer taxes applicable to businesses on pay slip of your employees. The following items must be considered in the calculation of payable tax of employee :
Taxable income
1) Form W -2 and wages
All the wages that were earned during the year must be mentioned .Your Employer must provide you with W-2 wages and tax statement.
2) Dividends
People make investments to make both the end meets and all the profit or sources of income must be declared while filing for Taxes.
3) Business Expenses
Business expenses must be reported separately from gross business income .As a business person you must keep track of all your expenses that goes into your business. Any receipt that you have can be kept as a record.
5) Rental Income
Usually rental income is consumed in making payments like mortgage , insurance and repairs. Hence if expense exceeds income then this must be mentioned.
5) Social Security
Social Security benefits are taxed depending upon the total income that you earn.
Non taxable income
Here are some of non-taxable income
1. Alimony
Alimony must be fully reported .Child support is a non taxable income. Not being able to include all these .Income details can surely cause later penalties and you may not get a proper refund.
2. Workers Comp
Workers’ compensation wage loss benefits are calculated based upon an injured worker’s average weekly wage. In general, most employees receive workers’ compensation benefits equal to roughly 2/3rds of the wages they earned before their work injury. Unfortunately, calculating wage loss benefits is not always easy.
