Q.What do I need to know about Payoll Taxes if I have only one employee?
A.By law, you are required to withhold and pay all related payroll taxes if you have employees. It doesn't matter if you have just 1 employee or 100- the same forms and procedures apply.
Federal Payroll taxes. First, you will have to deduct federal payroll taxes from your employee's paychecks. These include: (1) Federal Withholding and (2) FICA. The Federal Withholding Tax is determined by reviewing the federal payroll tax guide table, and varies. FICA is the Social Security and Medicare Taxes, which are calculated by multiplying the employee wages by a fixed percentage. For Social Security Tax, the percentage is 6.2%. For Medicare, the percentage is 1.45% .
State Payroll Taxes. In addition to federal payroll taxes, you will probably have to pay state payroll taxes. In California, the payroll taxes are paid to California's Employment Development Department. Please note that California's state payroll tax may be completely different from other state payroll tax requirements. California requires: (1) California State Withholding which is similar to the Federal withholding described above, and (2) SDI (State Disability Insurance), which is calculated by multiplying the employee wages by a fixed percentage of 0.9%.
Unemploymnent Taxes. In addition to federal and state payroll taxes, employers must also pay both federal and state Unemployment Taxes. FUTA, the federal unemployment tax is paid quarerly. California State Unemployment Tax involves two taxes: (1) Employment Training Tax (ETT) and (2) State Unemployment Insurance (SUI).
Workers Compensation Insurance. Finally, all California employers must also pay for Workers Compensation Insurance, the purpose of which is to cover employee injuries and rehabilitation.