At Abacus, we understand that calculating your payroll taxes can seem daunting, and we want to help. In the first two parts of this payroll tax blog series, we’ve covered what does and doesn’t qualify as taxable remuneration as well as defining the two key components of payroll tax.
After learning how to determine the employer portion and the employee portion of your payroll taxes, you might be, justifiably, worried that this process feels overwhelming or too complex. Well, we’ve got good news for you!
In this third part of our payroll tax blog series, we’ll introduce and walk you through an invaluable tool offered by the Office of the Tax Commissioner that makes working out what you owe substantially easier.
I Understand How the Employer Portion and Employee Portion of My Payroll Taxes Are Defined, But This All Seems Incredibly Complicated. How Do I Know I’m Paying the Right Amount?
We get it. We’re tax professionals and this is complicated stuff even for us. We tell the anecdote all the time of sitting in one of the information sessions that the Office of the Tax Commissioner offered when this process was announced and all we could think of was “how on earth are we going to do this?”
But don’t worry, we have some good news! The Office of the Tax Commissioner understood the complexity of this payroll tax calculation process, and they’ve built a set of truly helpful calculators that will help you get it right.
There are different calculators for you to use depending on the frequency of pay you use. Though this might seem straightforward, we would like to clarify just to be sure you’re using the correct tool. Weekly means you are paying your employees every week, and monthly means you’re paying your employees once every month. However, here is where some people can get mixed up. Bi-Weekly means you are paying your employees every two weeks, while Semi-Monthly means you are paying employees twice each month, regardless of the number of weeks in the month. Employers paying Bi-Weekly means you pay your employees 26 times a year. Semi-Monthly means you pay them 24 times a year. If you need to understand the tax liability of any individual employee at any time, there is also an Individual calculator available. It’s very important that you select the calculator that’s appropriate for your frequency of pay.
Here are links to the Office of the Tax Commissioner’s Payroll Tax Calculators:
Each calculator features a helpful set of instructions that guide you through filling them out. However, if you would like a video walkthrough of how to use these calculators, we highly recommend you watch our Payroll Tax: The Basics Webinar (the walkthrough begins at 34:38) or contact the Abacus team for help.
Now That I Have the Amounts Figured Out, How Do I Pay My Payroll Taxes?
The simplest and best way to file your payroll taxes is through the eTax online filing system. Once you’ve mastered filling out the calculator tools above, completing the eTax system will feel easy, as it requests mostly the same information and helps with most of the calculations. It also has internal check features to make sure it asks you for all required information at the correct times, which helps make this a smoother process and cuts down on potential mistakes.
Though everyone can use the eTax online system, any company with annual remuneration above $200,000, as well as all Exempted Companies, must use this online filing system to file their taxes.
Remember, payroll taxes are due quarterly on 15 January, 15 April, 15 July, and 15 October every year. If you don’t file your tax return, there’s a 5% penalty charged per month that the return is outstanding. The maximum penalty is 30%. If you file your taxes but you’re not able to pay, there is a 5% penalty on the underpayment. Remember, the Office of The Tax Commissioner is here to help you too, so if you need to set up a payment plan, don’t hesitate to contact them.
Want a little extra confidence that you’re completing the eTax online filing system correctly? We have a video walkthrough of this payment portal you can watch as part of our Payroll Tax: The Basics Webinar (this walkthrough begins at 1:19:14) or you can always contact us for assistance.
We hope this introduction the helpful tools offered by the Office of the Tax Commissioner, both the Payroll Tax calculators and the eTax online filing system, has calmed any concerns you have about correctly calculating and filing your quarterly payroll taxes. Our next blog will tackle some of the frequently asked questions we get regarding payroll taxes from the perspective of the business owner. If you have any questions we haven’t addressed yet, if you’d like any clarification, or if there’s any way Abacus can assist you with your payroll taxes or other accounting and financial needs, please contact us today.