When people think of Tennessee, they think Nashville, good ole’ twang and the city that strums guitars and heartstrings until the early hours of the morning. But as all Tennessee locals know, there is so much more to the state than Music City. Similarly, there is so much more to running a small business than meets the eye. As the owner of your own small business, you’re in charge of everything from opening shop to handling every crisis to paying your employees. We can’t help you with most of your day-to-day duties. What we can help you with is what we do best: payroll taxes. And even though Tennessee has no state income tax, you still have to worry about federal income tax as well as unemployment insurance.
We designed a nifty payroll calculator just for small business owners like you. ll you have to do is enter wage and W-4 information for each employee, and the calculator will do the rest.
First of all, let’s give Uncle Sam his due. 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 earn 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%. Fortunately for you, employers are not responsible for paying the Additional Medicare Tax.
The FUTA tax comes with a huge caveat that you need 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.
Although Tennessee doesn’t have a state income tax, it does have state unemployment insurance tax. For the calendar year 2019, Tennessee unemployment insurance rates range from 0.1% to 10%, with a taxable wage base of up to $7,000 per employee per year.
New employers pay a flat rate of 2.7%.
Now this is music to your ears! You’ve figured out all your payroll needs, so now you can focus on the important stuff for your small business. Get your signature ready because after you’ve calculated your employees’ net pay by implementing all deductions, it’s time to write those checks.
All you have to worry about is paying your employees on time and setting aside any taxes your company is responsible for (FICA and UI payments, we’re looking at you).
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.
If you’re still looking to fill your brain with more juicy payroll tax facts, here are some additional resources and contact information: