Payroll constitutes an essential part of every company. It involves paying employees on time and maintaining their tax records to file with the authorities. It is a double-edged sword, and any inadequacy can lead to backlashes from two sides. On the one hand, businesses will face protests from their employees who work for money. On the other hand, the government can impose penalties for non-compliance. Therefore, firms have to be very careful in managing their payroll and practice diligence and cautiousness. With the help of bookkeeping services online, companies can handle their payroll effectively. 

Every country has its payroll rules and obligations to protect its workers. A US-based business must fulfil its payroll tax obligations. These include withholding payroll taxes from employees' paychecks. The taxes for withholding involves FICA (medicare and social security), federal, state, and local income taxes. Here is a list of some payroll rules and regulations every firm must follow: 

Identify taxable workers: 

A business may employ a mix of independent contractors and working employees. The former category pays its taxes, whereas the latter is your responsibility. Since the distinction may not always be clear, the IRS provides a three-step test to identify taxable workers. The behavioural test provides the employer with the right to direct and control the employee. Financial difficulty studies the employers' control over the finances of the job. For example, an independent contractor like a payroll outsourcing company can advertise its services, whereas an in-house payroll professional cannot. The relationship test analyzes employer-employee relations and their duration. Unbounded means the connection exists, whereas a limited time or a particular project means an independent contractor is employed. 

Determining taxable wages:

Next, businesses must calculate the employee's wages subject to tax. These include salaries, bonuses, gifs, etc. However, it does not include travel or meal reimbursements. You must involve reasonable incomes and expenses for wage determination. 

Calculating withholding taxes:

Once you determine wages to calculate tax, the next step is to withhold a correct tax amount. It would help if you withheld federal, local, state, FICA, and FUTA taxes as applicable. Federal taxes are mandatory, whereas state taxes depend on every state's policies. FICA involves withholding social security and medical taxes. On the other hand, FUTA means unemployment taxes that are the employer's sole responsibility. Bookkeeping services online help businesses manage their complications.