Payroll Tax Deductions
Small Business Payroll Tax Deductions
Small business payroll tax deductions save money for both employees as well as employers. Payroll tax deductions are also commonly referred to as FICA tax.
Payroll tax savings can be generated by pre tax deductions. Every dollar contributed to a pre tax account lowers the employee's reportable income, and in turn lowers the amount of payroll taxes paid by a business: small, medium, or large.
Small Business Payroll Tax Deductions for 2012
Payroll tax deductions changed beginning in 2012. In the past both employee and employer paid the same percentage of payroll tax (FICA) - 7.65%. The breakdown of FICA was 6.2% for Social Security and 1.45% for Medicare. In 2011 the employer rate remains at 7.65% while the employee deduction is now 5.65% for employee gross income up to $108,600.
The Social Security Limit for 2012 is $108,600. For higher income amounts the FICA rate drops to .77% for both employees and employers.
Small Business Payroll Tax Savings
Small business payroll tax savings can be achieved by promoting the advantages of pre tax deductions for health insurance, supplemental insurance, flexible spending accounts, and 401k plans. Every dollar an employee directs to a voluntary program lowers the amount of payroll taxes paid by any business. Small businesses, medium businesses and large businesses all benefit.