Iowa is where dreams come true. He built it, and they came. Even 30 years later, the Field of Dreams movie site attracts more than 100,000 visitors every year who want to step on the field and have a catch. The movie might be fiction, but building your small business is not. Your small business is your dream. Whether you own a burger joint in Iowa City or a body shop in Des Moines, there’s one thing that’s definitely not part of your dream: payroll taxes.
We want you to create the business of your dreams without having to deal with payroll taxes, so we’ve designed a nifty payroll calculator that can figure out all of the federal and Iowa state payroll taxes for you and your employees. All you have to do is input wage and W-4 information for each employee into the calculator, and it will do the rest of the work for you.
First of all, for Uncle Sam’s sake, let’s calculate federal payroll taxes. Here’s a quick rundown of the components that go into federal tax withholdings. For a more detailed explanation on all of the steps below, head on over to our comprehensive step-by-step guide.
For employees who more than $200,000 per year, you’ll need to withhold an Additional Medicare Tax of 0.9%, which brings the total employee Medicare withholding above $200,000 to 2.35%. Employers are not responsible for paying the Additional Medicare Tax.
FUTA taxes come with a huge caveat that you will want to know about. You can claim a tax credit of up to 5.4% for state unemployment tax you pay, as long as you pay in full and on time. It’s an easy way to save a whopping 90%, so make sure you take advantage! Only you as the employer are responsible for paying FUTA taxes, so you don’t need to withhold FUTA from your employees’ paychecks.
Now that we’re done with federal taxes, let’s look at Iowa state income taxes. Iowa charges a progressive income tax, broken down into nine tax brackets. The 2019 tax rates are lower than in 2018, and they range from 0.33% on the low end to 8.53% on the high end.
Iowa does not have any local city taxes, so all of your employees will pay only the state income tax.
OnPay processes payroll and automates all your tax payments and filings.
As an employer in Iowa, you have to pay unemployment insurance to the state. The 2019 rates range from 0% to 7.5% on the first $30,600 in wages paid to each employee in a calendar year.
If you’re a new employer (congratulations!), you pay a flat rate of 1%. New construction employers pay 7.5%.
You’ve done it! You’ve checked it off your to-do list so you can move onto the important things. Once each employee’s net pay is calculated (after taking deductions and withholdings into consideration), you’re in the clear.
All you have to worry about is getting your employees paid on time as well as setting aside whatever you owe in FICA and unemployment taxes. Those numbers can add up quickly!
You will need to fill out Form 941 to file federal taxes on a quarterly basis, and Form 940 to report your annual FUTA liabilities. You can pay taxes online using the EFTPS payment system. All the IRS employment tax due dates can be found here.
As if that wasn’t enough, here are some helpful links that can if you would like to learn more about Iowa payroll taxes: