Everything You Need to Know About Payroll in Pennsylvania
If you are an employer in Pennsylvania, there are certain things you need to know about payroll in the state that you may not have considered before. Understanding these payroll laws will help you avoid costly mistakes and give you peace of mind when it comes to managing your employees and paying your taxes. Here’s everything you need to know about payroll in Pennsylvania.
The difference between gross pay and net pay
Gross pay is the total amount of money your employees earn before taxes and other deductions are taken out. Net pay is the amount of money your employees take home after all deductions have been made. These deductions include state income tax, federal income tax, Social Security, Medicare, unemployment insurance, retirement plan contributions and union dues. Employers should know these rates so they can determine how much to withhold from each paycheck. They should also be aware that it’s possible for an employee to not be exempt from Social Security or Medicare withholding if their annual earnings are less than $200,000. The rates for these two types of withholding are different and employers need to make sure they withhold the correct amounts.
Federal requirements for payroll
The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments.
Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Overtime premium pay is time and one half the regular rate of pay for hours worked over 40 hours in a workweek. Employers are required to maintain accurate records on wages, hours, and other conditions of employment as specified by law. All covered employers must display an official poster providing information on employees’ rights with respect to joining or forming a union and on any collective bargaining agreement.
The importance of state reporting
All employers who withhold taxes from their employees’ paychecks are required to file certain reports with the state. These reports keep track of how much money is being withheld, and they help the state make sure that employees are getting the tax refunds they’re entitled to. Filing these reports can be a bit complicated, but it’s important to do it right. Here’s what every employer needs to know about payroll in Pennsylvania. First, remember that all employers have to register with the PA Department of Labor & Industry (L&I) as an employer before they can collect wages from any employee. Next, when your employee has earned $300 or more in a year, you will need to provide them with a W-2 at the end of the year; this is true even if you don’t require your employees to give you any tax deductions during the year.
When you have an employee who works from home
You may be wondering how to do payroll in Pennsylvania if you have an employee who works from home. The good news is that it’s not as complicated as you might think. Here’s what every employer needs to know about payroll in Pennsylvania.
1) You need to set up a system for tracking hours for employees who work from home.
2) There are two sets of rules for calculating paychecks when there are employees with different tax statuses: federal and state.
3) Every time a new employee starts, they will fill out a W-4 form so the employer can withhold the appropriate amount of taxes each pay period.
Understanding your own business structure
Before you can understand how to do payroll in Pennsylvania, you need to understand your business structure. Are you a sole proprietor? Partnership? LLC? Corporation? Each type of business has different tax implications, so it’s important to know which category you fall into. Sole proprietors are the simplest because they have no shareholders and don’t have to file any paperwork with the IRS. Partnerships involve two or more people who share responsibility for running the company and dividing profits. A Limited Liability Company (LLC) is like a partnership but offers some protection from personal liability for its owners.
Hiring independent contractors vs. employees
When you’re running a business, it’s important to know the difference between an independent contractor and an employee. Independent contractors are not employees, and as such, they are not subject to withholding taxes from their paychecks. This means that if you hire an independent contractor, you will not have to withhold federal income tax, Social Security tax, or Medicare tax from their pay. However, you will still be responsible for paying state unemployment taxes on their behalf. In contrast, your company is liable for withholding federal and state income taxes when hiring an employee. Additionally, with employees, your company is required to contribute portions of the worker’s wages into retirement plans like 401(k)s or IRAs.
State taxes in PA
Every employer in Pennsylvania is responsible for withholding state taxes from their employees’ paychecks and remitting those funds to the state. The amount of tax withheld depends on the employee’s tax bracket. Employers must also withhold local taxes if they are located in a city or school district that imposes them. In addition to withholding taxes, employers must also pay unemployment taxes and workers’ compensation insurance premiums. To keep track of all these obligations, it’s important to know what every employer needs to know about payroll in PA.
Reporting at tax time
Reporting payroll taxes can be a bit daunting, but it’s important to make sure you’re doing it correctly. Here are a few things you need to know when it comes to reporting payroll taxes in Pennsylvania. First, all employers must withhold state income tax from their employees’ wages and send this money to the PA Department of Revenue. Second, employers must pay unemployment compensation taxes on behalf of their employees who are covered by the unemployment insurance system. Third, most businesses will need to collect sales tax from customers on taxable goods or services they provide and then submit those funds to the PA Department of Revenue monthly or quarterly depending on their sales volume.
