As an international employer, you have your work cut out for you. With each new country your company operates in, you have to learn the law about employment, payroll, and so on.

Request a quote for US payroll services today!

Developing expertise in one country takes time. Your payroll team may feel overwhelmed if they must learn another system and another set of rules. They could make costly mistakes.

This can certainly be the case for any company operating in the US. There are many different rules to contend with, and one mistake could lead to a cascade of problems. This guide will help you master the basics, so you can conduct payroll for your American employees with ease.

The Different Levels of US Payroll

The first thing any international employer needs to know about US payroll taxes is that there are a few different levels and types of taxes.

The US has three levels of government. Depending on where your employees are based, you may end up having to pay federal, state, and local payroll taxes.

The types of taxes assessed at each level also differ. The federal government and state governments both collect income tax and unemployment taxes. Only the federal government collects FICA taxes, which include Social Security and Medicare.

Local governments may collect taxes for local infrastructure, such as schools or public transit.

Who Pays the Tax

Once you’ve figured out which taxes are being assessed, determine who is responsible for footing the bill. Some taxes are a joint responsibility between the employee and employer, while others are the sole responsibility of the employer. Other taxes are collected from the employee’s earnings.

The breakdown can change by jurisdiction. In some states, you’ll share the costs of state unemployment programs with your employees. In others, only the employer pays.

FICA taxes are always a joint payment. Employees and employers each pay half of the contributions. In 2020, you’ll need to pay half of Medicare’s 2.9 percent contribution and 6.2 percent for Social Security. Your employees will pay the other half, which you’ll deduct from their earnings.

Income taxes are also withheld from the employees’ earnings. The employer collects and remits the funds to the IRS, but isn’t expected to contribute to the payment. The situation is usually similar with state taxes.

Schedules and Payments

For every different tax an employer must collect, there’s a schedule to follow. Your schedule is set by how much you remit in payroll taxes. If you send in $50,000 or more per quarter, the IRS will ask for a semi-weekly remittance. This is the most intense submission schedule, as you’ll be sending in taxes twice per week after each pay period.

Employers who remit less will submit on a monthly schedule. Your payments are due on the 15th of the month following the pay period. Whether you pay your employees on March 15 or March 29, you’ll need to remit payroll taxes by April 15.

Taxes that are sent to state authorities or the Social Security Administration may follow different schedules. The situation can become quite complex. You may have taxes and reports being filed almost any day of the month. You want to stay on top of these filings. Late reports and payments are some of the most common reasons employers face penalties.

Determining Rates

Most US payroll taxes are based on employee earnings. Federal income tax brackets change as employees earn more. Medicare is capped at 2.9 percent up to $200,000. If you pay an employee a salary that exceeds $200,000, they’ll need to pay an additional 0.9 percent.

Some employers pay just a fraction of the federal unemployment tax rate. If you pay your state unemployment taxes on time, you could even qualify for a discount.

Get the Support You Need

Knowing these fundamentals can help you avoid some of the more common US payroll errors. If you still need help, though, don’t be afraid to call in the experts. A PEO can make paying your US employees easier than ever.